Tuesday July 20th


Dow futures rebound by 200 points after average suffers worst day in 8 months

U.S. stock index futures rebounded slightly on Tuesday after concerns about the spread of Covid-19′s delta variant caused investors to dump equities in the prior session. Futures on the Dow Jones Industrial Average were up 161 points, or 0.46%. S&P 500 futures and Nasdaq 100 futures each gained 0.42%. Wall Street suffered a sharp sell-off Monday as investors feared that the fast-spreading delta coronavirus variant could hinder the economic recovery. The blue-chip Dow tumbled more than 700 points, or 2.1%, to post its worst day since October 28 of last year. The S&P 500 fell 1.6% and the Nasdaq Composite dropped about 1.1%. “We remain constructive on equities and see the latest round of growth and slowdown fears premature and overblown,” wrote Dubravko Lakos-Bujas, head of U.S. equity strategy at JPMorgan, in a note Tuesday. The strategist raised his year-end price target for the S&P 500 to 4,600 from 4,400, representing a gain of 8% from Monday’s close. Traders continued to eye the 10-year Treasury yield, which appeared to be driving the action in the equity markets. When the yield fell to a new 5-month low on Monday, it heightened concerns about the slowing global economy and helped push equities lower. The 10-year yield was unchanged at 1.18% early Tuesday and traders were likely reluctant to buy more stocks until the rate showed a solid bounce. The yield was above 1.78% in March and it’s fall amid the recovering economy has mystified and worried investors. Even after Monday’s drop, the S&P 500 is just 3.1% below its record hit last week. Additionally, while the equity benchmark dipped below its 50-day moving average during Monday’s rout, it ultimately closed above that key technical level, offering some hope to traders looking for a rebound on Tuesday. Many of the stocks that were hit the hardest on Monday, were bouncing in the premarket Tuesday. Shares of United Airlines bounced up 2% in early trading after losing 5% on Monday. American Airlines and Delta Air Lines were also bouncing. Royal Caribbean jumped 2% in premarket trading after falling 4% on Monday. Carnival was also bouncing. Bank shares were slightly bouncing as investors were still eyeing bond yields under pressure. JPMorgan was up 0.6% in premarket trading after losing 3% in the prior session. Bank of America added 0.8% in premarket trading. CNBC’s Jim Cramer said the sell-off Monday pushed out some of the speculators taking too much risk in stocks this year and it would end soon. “Once the speculators are blown out … and the stocks that are already down huge start rallying, then we can find a tradeable bottom,” Cramer said. “We’re close, but the speculators haven’t been fully crushed yet.” Bitcoin fell below the $30,000 level overnight, triggering selling across cryptocurrencies and another sign that speculation may be coming out of the markets. New Covid cases are rebounding in the U.S. as the delta variant spreads, largely among the unvaccinated. The U.S. is averaging about 26,000 daily cases in the last seven days, more than double the average from a month ago, according to CDC data. “Many of the cyclical companies are selling off on fears that Covid will stop the recovery in its tracks,” said Chris Zaccarelli, CIO at Independent Advisor Alliance. “We don’t believe that that’s the case and are willing to let the sell-off run its course and buy the dip on the belief that the economy will fully recover and return to its prior growth trajectory, bringing most of the cyclical companies in the airline, travel and leisure industries along with it.” IBM shares jumped 3% in extended trading Monday after the enterprise technology and services provider reported second-quarter results that topped expectations and showed its strongest revenue growth in three years. Netflix shares were about 0.8% lower in the premarket ahead of the company’s second-quarter earnings after the bell Tuesday. Shares in Asia-Pacific fell on Tuesday following an overnight tumble for stocks on Wall Street that saw the Dow Jones Industrial Average plunge more than 700 points. In Japan, the Nikkei 225 slipped 0.96% to close at 27,388.16 — the Nikkei is down more than 10% from its February high as of today’s close. Meanwhile, the Topix index fell 0.96% to end the trading day at 1,888.89. South Korea’s Kospi closed 0.35% lower at 3,232.70. Mainland Chinese stocks closed mixed, with the Shanghai composite fractionally lower at 3,536.79 while the Shenzhen component advanced 0.123% to 15,011.35. Hong Kong’s Hang Seng index fell about 0.7%, as of its final hour of trading. Oil prices stabilized on Tuesday after slumping around 7% in the previous session amid a broader market retreat led by concerns about a resurgence of COVID-19 infections, which came just as producers inked a new supply deal. Brent crude dipped 21 cents, or 0.3%, to trade at $68.41 per barrel. The U.S. crude contract for August delivery, which expires later on Tuesday, was up 21 cents, or 0.3%, at $66.63 a barrel. Gold prices edged higher on Tuesday as concerns over the economic damage from surging cases of the Delta coronavirus variant, and a dip in U.S. Treasury yields, pushed the metal above a one week low hit in the last session. Spot gold was up 0.3% at $1,818.43 per ounce by 1024 GMT, having hit a low of $1,794.06 in the previous session. U.S. gold futures gained 0.5% to $1,817.30.