Traders on the floor of the New York Stock Exchange, June 28, 2022.
US stock futures were flat on Tuesday night after the market saw a major midday reversal, with lower bond yields giving a boost to growth stocks, and before a batch of economic data.
Dow Jones Industrial Average futures hovered around a flat line. S&P 500 and Nasdaq 100 futures contracts also changed slightly.
In regular trading, the Dow lost 129 points to start the holiday’s shortened week, trimming larger losses earlier in the session. The S&P 500 rebounded from a 2% loss in the last hour of trading and finished the day 0.2% higher. The high-tech Nasdaq Composite outperformed, jumping 1.75%.
Whether the market is about to fall into a recession continues to worry investors after the 10-year US Treasury yield fell below the 2-year yield. The so-called yield curve inversion has historically been a warning sign that the economy may be declining or has already fallen into a recession.
Oil prices fell below $100 a barrel on Tuesday, further reflecting a potential economic slowdown. Energy stocks were the biggest losers on Tuesday. The sector as a whole fell by 4%. It was the best performing sector in the S&P 500 for the first half of the year, the worst first half for the benchmark since 1970.
However, Wall Street analysts say the recession could be mild. Credit Suisse said Tuesday it sees the United States avoiding a recession as it lowered its year-end target on the S&P 500 index to reflect the impact of higher cost of capital on stock valuations.
“[The market] was preparing for [a recession], and now you might actually embrace it, and the idea is: Let’s get it over with, we’re going to have a slump, so let’s do it. Let’s clear the excesses and start over,” Ed Yardeni of Yardeni Research said on CNBC’s “Close Bell: Overtime.”
“The market is starting to look forward to the year ahead, and this could be the year to recover from whatever recession environment that may be,” he added. “We’re all doing some kind of hamlet slump – to be or not to be. I’m kind of thinking there’s going to be a mild slump.”
Cameron Dawson, chief investment officer at NewEdge Wealth, echoed that sentiment.
“Do we have the kind of drop that looks like it’s in the 30% range, which is the average of the recessions, or something that looks closer to the 50% drop, which we saw in the early 2000s and 2008 where we had two debt crises? “We don’t see a debt crisis,” she said. We think we can start to find some value around that level between 3400 and 3500 because that’s what brings us back to pre-Covid highs.”
There are no major earnings reports due on Wednesday, but there will be a slew of economic reports due, including the minutes of the Federal Reserve’s June meeting in the afternoon.
Investors are also looking forward to the latest reading of the Mortgage Bankers Association’s Mortgage Purchase Index at 7:00 AM ET Wednesday. The latest Markit and ISM manufacturing PMI data will be released at 9:45 AM and 10:00 AM respectively. The Employment Opportunity and Employment Turnover Survey, or JOLTS, will also be released at 10:00 a.m.