U.S. stock market targets rally on Tuesday after Evergrande sparked worst day since May

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US equity index futures indicated a modest rally in major benchmarks on Tuesday after the S&P 500’s worst day in more than four months.

  • Futures on the Dow Jones Industrial Average YM00,
    + 0.64%
    jumped 258 points, or 0.8%, to 34,097.

  • Futures on the S&P 500 ES00,
    + 0.55%
    increased 0.7%, or 30.50 points, to 4,378.75.

  • Nasdaq -100 NQ00 futures,
    + 0.49%
    gained 99.50 points to reach 15,111.25, a gain of 0.7%

Monday, the Dow DJIA,
-1.78%
lost 614 points, or 1.8%, to 33,970, the S&P 500 SPX,
-1.70%
fell 75 points, or 1.7%, to 4,358, and the Nasdaq Composite COMP,
-2.19%
fell 330 points, or 2.2%, to 14,714.

What drives the markets

Is it Tuesday’s turnaround on Wall Street?

The unfolding saga of China Evergrande 3333,
-0.44%,
a real estate developer who is expected to default in the coming weeks, set the tone on Monday for the worst downturn for much of the market since May. It happened on a day when many key Asian markets were closed for holidays, and Chinese markets remain closed for holidays.

“The market liquidation which intensified overnight is mainly due to technical sell flows (CTA and option hedging) in a low liquidity environment and the overreaction of discretionary traders to perceived risks,” said said Marko Kolanovic, chief global markets strategist at JPMorgan Chase.

Kolanovic predicts a recovery as the coronavirus delta wave wears off and expects companies to beat expectations for third quarter earnings.

Wall Street analysts have had a hard time saying Evergrande is not China’s Lehman moment.

“A real ‘Lehman moment’ is a crisis of a very different magnitude,” said Barclays analysts led by Ajay Rajadhyaksha. “We should see a strike by lenders in large parts of the financial system, a sharp increase in credit difficulties far from the real estate sector and banks reluctant to compete in the interbank financing market. And with all of this, we would also need to see massive political mistakes on the part of the Chinese authorities ”,

Read: Will Evergrande be China’s “Lehman Moment”? Wall Street says no

Concerns over Evergrande came at a critical juncture, with several companies correctly warning that September would be chaotic for US stocks after a mild summer.

The Federal Reserve kicks off the first of a two-day meeting on Tuesday that could lead to more hawkish interest rate forecasts, with Congress so far unwilling to raise the federal debt ceiling as it struggles to agree on a set of infrastructure spending.

Even after Monday’s fireworks and losses in nine of the last 11 sessions, the S&P 500 is only 4% below its all-time high.

In the news of public health, Johnson & johnson
JNJ,
-0.57%
Data from a phase 3 trial and real-world evidence confirm that its single-injection COVID-19 vaccine offers strong, long-lasting protection against hospitalization and death. The company said other data shows that a booster offers increased protection and antibodies.

U.S. homebuilders began building homes at a seasonally adjusted annual rate of 1.62 million in August, a 3.9% increase from the previous month, the US Census Bureau reported on Tuesday. Compared with August 2020, housing starts are up 17.4%. The pace of issuing permits for new housing units also increased in August, up 6% from July and 13.5% from a year ago.

Which companies are targeted?

  • Actions of Uber Technologies Inc. UBER rebounded 4.3% in pre-market trading on Tuesday, after updating its outlook for the third quarter after the rideshare and delivery company saw its first months of profitability in Adjusted EBITDA (profit before interest, taxes, depreciation and amortization) in July and August.

  • Actions of Bill.com Holdings Inc. BILL fell 5.6% in pre-market trading on Tuesday, after the software provider aimed at simplifying back-office operations announced the offering of $ 1 billion of common stock to the public and $ 500 million. dollars of convertible debt to qualified institutional investors.

  • Transfix Inc., a digital freight platform, announced its IPO on Tuesday by merging with specialist acquisition firm G Squared Ascend GSQD, at + 1.55% in an agreement with a value of d The $ 1.1 billion pro forma business.

  • Actions of Activision Blizzard Inc. ATVI said Tuesday it continues to work with regulators to address and resolve workplace complaints as it cooperates with a Securities and Exchange Commission investigation into disclosures relating to employment matters.

How are other assets traded?

  • The yield on the 10-year TMUBMUSD10Y T-bill rose 0.8 basis points to around 1.318% after the benchmark yield saw its largest rise since August 13, according to Dow Jones Market Data. The yields and prices of debt move in opposite directions.

  • The ICE US Dollar Index DXY, a measure of the currency against a basket of six rivals, fell 0.2%.

  • The oil futures traded higher on Tuesday, with the US benchmark CL00 trading up 0.9% to $ 70.78 per barrel. GC00 gold futures rose 0.3% to trade at $ 1,768.70 an ounce.

  • In Asia, Hang Seng HSI from Hong Kong,
    + 0.51%
    managed a slight lead after Monday’s 3.3% rout, while the Nikkei 225 NIK,
    -2.17%
    collapsed in Tokyo after vacation. Chinese markets remain closed until Wednesday.

  • European markets also recorded gains, with the Stoxx Europe 600 SXXP,
    +1.02%
    up 1% in morning trading and London’s FTSE 100 UKX,
    + 1.15%
    1.2% higher trading.

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