Tuesday May 17th

U.S. stock index futures were sharply higher on Tuesday morning as the market tried to bounce after a punishing bear market for the tech-heavy Nasdaq and a 19% pullback for the S&P 500. Futures contracts tied to the Dow Jones Industrial Average jumped more than 300 points, or 1.1%. S&P 500 futures gained 1.4%, while Nasdaq 100 futures added 1.8%. Tuesday’s bounce marks the market’s latest attempt at a recovery following weeks of steep losses. The S&P 500 is coming off a six-week losing streak — its longest since 2011. The Dow, meanwhile, has fallen for seven straight weeks, marking its longest weekly slide since 2001. Year to date, the S&P 500 and Dow are down 15.9% and 11.3%, respectively. “On top of this, investors were encouraged by three consecutive days of relatively normal and boring price action in US stocks, a sharp contrast to the last few weeks,” wrote Adam Crisafulli of Vital Knowledge. A slew of stocks surged in Tuesday premarket trading. Citigroup shares jumped 5% in premarket trading after a filing revealed Monday evening that Warren Buffett’s Berkshire Hathaway added a nearly $3 billon stake in the struggling bank in the first quarter. Citi shares have underperformed the rest of the financial sector in the past 12 months, down nearly 40% while the Financial Select Sector SPDR Fund is off by 12% over the same period. Other bank stocks climbed higher on the Citi news. Shares of Bank of America and JPMorgan Chase rose 1% in premarket trading. Travel stocks popped in the premarket after United Airlines raised its revenue outlook for the second quarter on improved consumer demand. United Airlines’ stock price rose 4%, Delta’s jumped 3% and American Airlines’ jumped 3%. Home Depot shares rose more than 3% in the premarket after the home improvement retailer posted better-than-expected quarterly results. The company also raised its full-year outlook. Semiconductor stocks climbed higher in premarket trading. Shares of Advanced Micro Devices jumped more than 3% following an upgrade from Piper Sandler, which said the stock looked attractive after falling 34.5% this year. Nvidia’s stock price rose 3%, Qualcomm’s jumped 2.4% and Micron Technology’s rose 2%. Meanwhile, Walmart shares dropped more than 5% in the premarket after the retail giant reported an earnings miss because of inflation pressure. The company raised its sales outlook, but lowered its profit forecast. Investors will also be monitoring comments from Federal Reserve Chairman Jerome Powell who will speak on the central bank’s plans to address inflation at a Wall Street Journal conference at 2 p.m. ET. On the economic front, retail sales numbers came in about as expected. Consumer spending on retail rose 0.9% in April, according to the U.S. Census Bureau. They rose 0.4% excluding spending on autos. Inflation concerns have been a mounting headwind for stocks, with some investors worried the economy could ultimately tip into a recession. “We see clear late-cycle indicators, and while the risk of economic growth contraction or recession has risen steadily through the first four-and-a-half months of this year, we are now beginning to cross over a probability level that makes recession a base case for the end of this year and beginning of next,” Darrell Cronk, president of Wells Fargo Investment Institute wrote in a note Monday. Traders are coming off a choppy session that ended with the S&P 500 and Nasdaq Composite losing 0.4% and 1.2%, respectively. The Dow, meanwhile, eked out a small gain Monday. “In a sense, the poor performance this year for tech and growth companies is somewhat of a payback for the impressive returns these market segments had recently enjoyed,” UBS said Monday in a note to clients. The tailwinds of the pandemic — a jump in stay-at-home spending and low interest rates — have since turned to headwinds. Now, consumer spending is shifting and rates are rising. “While we think that long-term interest rates have peaked for now, growth stocks are still expensive relative to value stocks,” UBS added. Shares in Asia-Pacific rose on Tuesday as Hong Kong stocks led gains regionally. The Hang Seng index surged 3.27% on Tuesday to close at 20,602.52 as Chinese tech stocks jumped. Tencent rose 5.26% while Alibaba soared 7.03% and Meituan gained 6.24%. The Hang Seng Tech index climbed 5.78% to 4,272.95. Mainland Chinese stocks edged higher on the day, with the Shanghai Composite up 0.65% to 3,093.70 while the Shenzhen Component rose 1.233% to 11,230.16. The Nikkei 225 in Japan climbed 0.42% to close at 26,659.75 while the Topix index rose 0.19% to 1,866.71. South Korea’s Kospi gained 0.92% to end the trading day at 2,620.44. Oil hit its highest in seven weeks on Tuesday, supported by the European Union’s ongoing push for a ban on Russian oil imports that would tighten supply and as investors focused on higher demand from an easing of China’s COVID lockdowns. EU foreign ministers failed on Monday in their effort to pressure Hungary to lift its veto on the proposed oil embargo. But some diplomats now point to a May 30-31 summit as the moment for agreement on a phased ban on Russian oil. Brent crude rose as high as $115.69, its highest since March 28. U.S. West Texas Intermediate (WTI) crude gained $1.17, or 1%, to $115.37. Gold prices firmed on Tuesday, as a pullback in the dollar supported demand for greenback-priced bullion and countered pressure from a recovery in U.S. Treasury yields. Spot gold was up 0.2% at $1,826.95 per ounce, by 0542 GMT. U.S. gold futures gained 0.6% to $1,824.40.