Dow futures surge 400 points as the market tries to recover from a brutal week

Stock futures rose in early morning trading Tuesday following a brutal week as investors assessed a more aggressive Federal Reserve and rising chances of a recession.

Futures on the Dow Jones Industrial Average jumped 404 points, or 1.4%. S&P 500 futures climbed 1.5%, and Nasdaq 100 futures popped 1.4%. U.S. stock markets were closed Monday for Juneteenth.

“There’s not a single reason for the bounce in equities, and the overwhelming view is dismissing the uptick as being nothing more than dead cat, something that should be faded just like all the other rally attempts lately. We push back a little bit on that view, largely because of an approaching inflation shift,” wrote Adam Crisafulli of Vital Knowledge.

Crisafulli noted that Brent crude was trading roughly $10 below a recent high, while President Joe Biden gets set for a trip to Saudi Arabia to discuss energy production. He also pointed out that iron ore and copper have fallen recently.

“If commodities can stay on a downward trajectory, it would remove a massive overhang from equity markets,” he said.

Brent crude futures traded 1.4% higher at $115.75 per barrel. West Texas Intermediate, the U.S. oil benchmark, gained 2.2% to $110.41 per barrel.

Shares of Kellogg jumped more than 7% in premarket trading after the company said it would split into three separate companies. Separately, food company Mondelez increased 1.2% in premarket trading following news that it would acquire energy bar maker Clif Bar in a $2.9 billion transaction.

Airline stocks soared higher in premarket trading after last week’s tumble. Shares of Spirit Airlines jumped more than 9% in premarket trading after JetBlue raised its takeover offer to $33.50 a share, even as Spirit deliberates a proposed merger with Frontier Group. JetBlue’s stock price jumped 1.8% in premarket trading.

The major averages suffered their 10th losing week in 11 last week on fears that the central bank will hike rates aggressively to tame inflation at the risk of causing an economic downturn. The S&P 500 dropped 5.8% last week for its biggest weekly loss since March 2020, dipping deeper into bear market territory. The equity benchmark is now more than 23% off its record high from early January.

The blue-chip Dow slid 4.8% last week, falling below 30,000 for the first time since January 2021 last week. The tech-heavy Nasdaq Composite slipped 4.8% last week, down 33% from its record high.

“The recent drop in equity markets and inflection in investor attitudes make a bottoming thesis more difficult to make,” said Nationwide’s chief of investment research, Mark Hackett. “Investors are acting emotionally, but the fundamentals are beginning to follow the weakness in the technicals.”

Fed Chair Jerome Powell will testify before Congress Wednesday and Thursday. His appearance comes after a recent rate hike by three-quarters of a percentage point, the central bank’s biggest increase since 1994.

Investors will monitor incoming data, including existing home sales on Tuesday, to gauge the health of the economy. Recent data showing low consumer confidence, falling retail spending and a cooling housing market have fueled recession fears as the Fed battles inflation at 41-year highs.

Meanwhile, cryptocurrencies continued their roller-coaster ride. Bitcoin fell to a new 2022 low of $17,601.58 over the weekend before climbing back above the $20,000 mark on Monday. The world’s largest cryptocurrency by market cap sits 70% below its all-time high hit in November.

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