U.S. stock futures were up sharply on 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 at the most recent high of a broad market index.
Futures linked to the S&P 500 rose 1.2% in early trading, while Dow Jones Industrial futures added about 275 points, or 0.9%. Technology led the way, with contracts on the tech-heavy Nasdaq Composite up a whopping 1.4%.
On Tuesday, Chicago Fed President Charles Evans told a forum in London that the US central bank will need to raise interest rates by at least another percentage point this year, but does not see the labor market heading towards “recession-like” conditions. .
Tuesday’s moves come as Wall Street increasingly anticipates that the Federal Reserve’s rate-hike campaign to fight inflation will lead to an economic slowdown. Chairman 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 difficult and we do not know if this process will lead to a recession or, if so, what would be the significance of this recession,” he said.
The CBOE Volatility Index (^VIX), which measures Wall Street’s expectations for near-term market volatility, remained well above the key 30 level, hitting its highest level since June 17. the yield held above 3.82% – the highest since April 2010 – and the 2-year Treasury above 4.2%, a 15-year high.
As major averages have slipped below their June 16 lows, strategists are wondering how far the indices should fall as Fed policymakers make further rate hikes and, on the corporate side, analysts begin reduce profit expectations.
Morgan Stanley’s Mike Wilson, among the most bearish analysts on equities, expects an acceleration in downward earnings revisions in the coming months to drive stocks lower, predicting the S&P 500 will range 3,000 to 3,400 later this fall.
Meanwhile, Chris Larkin, managing director of trading at Morgan Stanley’s E*TRADE, was more optimistic.
He said in a note: “Many traders and investors may not have noticed that last week’s slide took the SPX back below its bear market threshold, and as unwelcome as this milestone may be, trends Historical records show that the worst was often over by the time the SPX first hit the bear market threshold – which, in this case, was just over three months ago.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
Click here for the latest stock market trends from the Yahoo Finance platform
Click here for the latest stock market news and in-depth analysis, including events moving stocks
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app to Apple Where android
Follow Yahoo Finance on Twitter, Facebook, instagram, Flipboard, LinkedInand Youtube