After five straight sessions of negative closing, the US equity indices are recovering in the early trading on Tuesday.
The US equity market has faced a dramatic decline this month of September as concerns of Fed rate hikes and global economic slowdown hover around. However, US stock futures rallied in the early trading session on Tuesday.
US Stock Futures
The Nasdaq futures have surged by 1.6% while the S&P 500 futures are up by 1.42%. Similarly, the futures for the Dow Jones Industrial Average have surged by 1.27% or 379 points. This surge in stock futures comes after five consecutive days of negative closing of the indexes.
On Monday, the Dow Jones dropped more than 300 points while the S&P 500 closed at the lowest levels of 2022. So far in 2020, both the indices have dropped more than 20% putting them in an official bear zone territory.
The recent round of selling pressure in the US equities comes on the backdrop of several factors. Firstly, the Fed has committed itself to bringing inflation down by taking a hawkish stand with interest rate hikes. The US central bank will further continue with rate hikes ahead this year in November and December meetings.
Wall Street is even more concerned that the six months long inflation fight by the Fed could push the US economy into recession. Furthermore, the currency market and rising dollar index are also hinting at greater trouble.
On Monday, the British Pound dropped to its lowest against the US Dollar. Speaking about this, Max Gokhman, CIO at AlphaTrAI said:
“Typically, US investors wouldn’t care too much about something like this, and especially more recently. And so this to me says that now there is this fear that is gripping investors a lot more than it did before. That in turn will lead to a capitulation moment where we really are at a bottom”.
Oil Prices Recover after Hitting New Lows
On Monday, the oil price tanked to a new low in January 2022 hitting at $86 per barrel. However, it recovered during the early trading session on Tuesday.
Earlier today, the West Texas Intermediate crude futures gained 1% moving at $77.50 per barrel. Similarly, the global benchmark for Brent Crude has gained 1.5% and is trading at $85.19 per barrel. The recent price recovery has been supported by the supply cuts in the Gulf of Mexico.