U.S. stock futures were sharply higher Tuesday after the S&P 500 slid to a new closing low and the Dow Jones Industrial Average entered an official bear market – a drop of 20% or more from a broad market index’s most recent high.
Futures tied to the S&P 500 rose 1.2% in the early trade, while Dow Jones Industrial futures added around 275 points, or 0.9%. Technology led the way up, with contracts on the tech-heavy Nasdaq Composite a sizable 1.4% higher.
On Tuesday, Chicago Fed President Charles Evans said while speaking at a forum in London that the U.S. central bank will need to raise interest rates by at least another percentage point this year but does not see the labor market heading into “recession-like” conditions.
Tuesday’s moves come as Wall Street increasingly anticipates the Federal Reserve’s rate-hiking campaign to fight inflation will result in an economic downturn after Chair Jerome Powell repeatedly warned of some “pain” in a speech last week following the central bank’s latest policy announcement.
“We have always understood that restoring price stability while achieving a relatively modest decline in unemployment and a soft landing would be very challenging and we don’t know whether this process will lead to a recession or if so, how significant that recession would be,” he said.
The CBOE Volatility Index (^VIX), which measures Wall Street’s expectations for short-term market volatility, remained well above the key 30 level, its highest reading since June 17. Treasury yields retreated from a sharp ascent but the 10-year Treasury yield held above 3.82%, the highest since April 2010 and the 2-year Treasury note above 4.2%, a 15-year high.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 26, 2022. REUTERS/Brendan McDermid
As the major averages slip below their June 16 lows, strategists are wondering how much lower the indexes have to fall as Fed policymakers proceed with more rate increases and on the corporate side, analysts begin to slash earnings expectations.
Morgan Stanley’s Mike…