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Market Snapshot: Dow futures up over 200 points on optimism over earnings reports

Anxiety over the global fixed income sector continued to fade in the wake of the U.K. government's budget U-turn. Read More...

U.S. stock futures rose on Tuesday as optimism about the corporate earnings season and calmer conditions in bond markets supported traders’ risk appetite.

How are stock-index futures trading
  • S&P 500 futures ES00, +1.17% rose 36 points, or 1%, to 3725
  • Dow Jones Industrial Average futures YM00, +0.92% added 240 points, or 0.8%, to 30470
  • Nasdaq 100 futures NQ00, +1.46% climbed 137 points, or 1.2%, to 11248

On Monday, the Dow Jones Industrial Average DJIA, +1.86% rose 551 points, or 1.86%, to 30186, the S&P 500 SPX, +2.65% increased 95 points, or 2.65%, to 3678, and the Nasdaq Composite COMP, +3.43% gained 354 points, or 3.43%, to 10676. The S&P 500 is up 2.8% from its 2022 closing low of 3577.03 hit Wednesday, October 12, 2022, but remains down 22.8% for the year to date.

What’s driving markets

Wall Street was on course for a second day of chunky gains as anxiety over the global fixed income sector continued to fade in the wake of the U.K. government’s budget U-turn.

Extra impetus came from news the Bank of England would delay its bond sale program, a move that highlighted central banks’ readiness to halt monetary tightening if needed. though the central bank said that story was “inaccurate.”

“The rally in gilts [U.K. government bonds] in recent trading sessions could put a near-term floor under broader fixed income. Further, the BoE postponing QT offers the potential for a decline in global rates volatility, a pre-condition for a broader improvement in cross-asset risk sentiment,” said Stephen Innes, managing partner at SPI Asset Management.

Also helping underpin sentiment has been a generally well-received nascent corporate earnings season. Goldman Sachs GS, +2.24% is arguably the headliner on a Tuesday that also includes Johnson & Johnson JNJ, +1.30%, Lockheed Martin LMT, +2.03% and, after the close, Netflix NFLX, +6.57%.

Some analysts remained skeptical of the rebound’s longevity, however. Jonathan Krinsky, chief market technician at BTIG, noted that although the Nasdaq 100 gained more than 3% in the previous session, it had traded only within Friday’s range.

“That qualifies as an ‘inside day’. A 3% inside day is quite rare, and has happened just 9 other times when below its 200 DMA since inception in 1985. While stats, particularly those with small sample sizes, should never be used in isolation, we think the recent action is telling and has tended to occur in the midst of bear markets more than the start of new bulls,” said Krinsky.

He concluded: “We don’t think we are at the final end of this bear market, and therefore would be inclined to fade this rally.”

Similarly, Mark Newton, technical strategist at Fundstrat, said in a note to clients that the recent market strength had not been enough to break either the one or two-month downtrend and that importantly, Treasury yields TMUBMUSD10Y, 4.024%, which closed on Monday above 4%, seem poised to break higher still.

“Overall, the ability to exceed early month peaks at 3825 [for the S&P 500] will be an important first step which would help to add conviction on rallies. At present, I suspect indices could be in for some additional volatile trading over the next week before officially bottoming,” Newton said.

The U.S. 10-year Treasury yield was down 1.4 basis points on Tuesday at 4.001%, ahead of September industrial production and capacity utilization rate data due at 9:15 a.m. Eastern Time. The NAHB home builders index for October will be published at 10 a.m.

There will be more talk from Federal Reserve officials, too. Atlanta Fed President Raphael Bostic is due to speak at 2 p.m. and Minneapolis Fed President Neel Kashkari will deliver remarks at 5:30 p.m..

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