05 Feb Stock futures try to stage comeback, but market looks to open lower Tuesday
Stocks look set for another rocky opening and a volatile trading day Tuesday.
Stock futures rebounded in early trading Monday, but not enough to indicate a higher open Tuesday morning. The S&P 500 futures were up 22 points, and fair value suggested an opening that would be 21 points lower, while Dow futures jumped more than 200 points initially, before giving up roughly half their.
Futures are volatile and late night prices may look far different from stocks at the opening bell.
The S&P 500 was down 113 points, or 4.1 percent Monday in its worst day since August, 2011. The futures, which typically match the spot market’s decline, fell even more in the earlier session, off by 5.3 percent.
The cash S&P 500, which closed at 2,648, touched 2,638 in afternoon trading, and that is the level traders are watching to see if it can act as support or signal more selling.
“It’s definitely volume selling,” said Scott Redler, partner with T3Live.com. He said the action in the futures market could indicate a lower open Tuesday.
“That could help create a down open which could put in a potential low that could help create a turnaround Tuesday situation. That would be good to relieve some pressure,” said Redler.
A major source of pressure for stocks in the past week has been the bond market, where yields have been spiking with higher inflation expectations. That triggered speculation that the Fed could raise interest rates more than the three times it forecast for this year.
But Treasurys reversed sharply Monday, with morning selling giving way to buying by investors worried about the sharp drop in stock prices. In an unusual and stunning turnaround, the bench mark 10-year Treasury yield plummeted to 2.70 percent from a four-year high of 2.88 percent reached in morning trading.
Michael O’Rourke, chief market strategist at JonesTrading, said he expects the market to be highly volatile Tuesday. He said the sharp selloff in ETFs that short volatility could have ripple effects in the stock market since holders have been forced to liquidate.
“They’re liquidating their positions after hours,” he said. The VIX, the CBOE’s volatility index, jumped 117 percent to 37.32. The XIV, which shorts the VIX, was down 80 percent in late trading, and investors who shorted the VXX were being squeezed.