Stock futures rose on Tuesday as the Dow Jones Industrial Average and the S&P 500 tried to recover from their lowest closing levels in nearly two years.
The Dow Jones Industrial Average advanced 332 points, or 1.1%. S&P 500 futures gained 1.4% and Nasdaq 100 futures gained 1.7%.
The British pound recovered slightly after falling to a record low against the dollar earlier in the week. Sterling traded more than 1% higher at $1.087 per dollar after hitting a record low of $1.0382.
Treasury yields also eased from their highs, boosting sentiment. The benchmark 10-year yield fell nearly 5 basis points to 3.823%.
Chicago Federal Reserve President Charles Evans expressed some apprehension that the central bank will raise rates too quickly to fight inflation.
The move in futures comes after five straight days of losses for stocks, with the S&P 500 closing at its lowest level since 2020. The Dow fell more than 300 points on Monday, putting it in a bear market after falling more than 20% below its record high. The 30-stock average also posted its lowest closing level since late 2020.
Technical indicators show that the sell-off has been historic. According to Bespoke Investment Group, the 10-day downtrend line for the S&P 500 has hit an all-time low, meaning market breadth is at its worst level in at least 32 years.
The latest round of selling appears to have several catalysts, including an aggressive Federal Reserve and rising interest rates, which in turn have weighed on currency markets. The British pound fell to a record low against the dollar on Monday, unnerving investors on both sides of the Atlantic.
“U.S. investors wouldn’t normally care much about something like this, and especially more recently. And that to me says that there’s this fear now that’s gripping investors a lot more than before. That, in turn, it will lead to a moment of capitulation where we are really in the deep end,” said Max Gokhman, CIO of AlphaTrAI.
On Tuesday, investors will get several new economic data, including September consumer confidence, August durable goods orders and July home prices. Wall Street has grown increasingly concerned that the Fed’s six-month fight against inflation will push the economy into recession.