The U.S equity futures struggled in pre-market trading Tuesday despite seeing a bounce last week that snapped the longest losing streak for stocks in over two decades, when it was just 0.3%. Futures tied to major indices like Nasdaq dropped 120 points or about 0.4%, which is not surprising given their recent performance over the past few months due to worries around global economic growth .
The recent upward trend in all three indexes has been positive, with weekly gains over 6%. This is making better progress after seven consecutive losing weeks for S&P 500 and Nasdaq as well eight torturous days for the Dow.
Crude oil futures charged higher on reports that Chinese authorities plan to end a two-month COVID lockdown in Shanghai and EU leaders agreed to stop purchases of crude from Russia. The WTI price rose 3.6% while Brent increased 3.7%.
Wall Street is getting a boost from positive earnings reports. The recent economic data has also helped alleviate concerns over inflation. Stocks are down for the year, but some strategists say they may not have reached rock bottom just yet.
“Last week’s strength will prove to be another bear market rally in the end,” said Morgan Stanley CIO Michael Wilson in a note.
Stocks have had a month filled with volatility as investors wait to see if inflation will continue its decades-long rise and what effect higher interest rates might have on the economy, especially with the interest rates pointing to a possible recession.
“The primary rationale ascribed to this particular rally beyond just an oversold bounce is that the Fed may be contemplating a pause in September,” Wilson said. He also added that “inflation remains too high for the Fed’s liking and so whatever pivot investors might be hoping for will be too immaterial to change the downtrend in equity prices.”
Investors are closely monitoring a plethora of key employment data this week, including the May jobs report due Friday.