Bargain Hunting May Contribute To Early Rebound On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to regain ground after moving sharply lower over the past few sessions.

Bargain hunting may contribute to early strength on Wall Street, as some traders look to pick up stocks at relatively reduced levels.

The sell-off seen in recent days has dragged the Nasdaq and the S&P 500 down to three-month lows amid concerns about the outlook for the U.S. economy.

A positive reaction to some of the latest corporate earnings news may also generate early buying interest, with shares of Uber (UBER) spiking by 8.9 percent in pre-market trading after the ride-sharing company reported better than expected second quarter results.

Industrial equipment maker Caterpillar (CAT) is also likely to see initial strength after reporting second quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of CSX Corp. (CSX) may also move to the upside after the rail transportation company reported better than expected second quarter earnings.

Stocks moved sharply lower during trading on Monday, extending the sell-off seen to close out the previous week. The major averages all showed significant declines, with the Nasdaq and the S&P 500 hitting three-month lows.

The major averages ended the day off their lows of the session but still firmly negative. The Nasdaq plunged 576.08 points or 3.4 percent to 16,200.08, the S&P 500 dove 160.23 points or 3.0 percent to 5,186.33 and the Dow tumbled 1,033.99 or 2.6 percent to 38,703.27.

The continued weakness on Wall Street came on the heels of an overseas sell-off, which saw Japan’s Nikkei 225 Index record its biggest slump since “Black Monday” in October 1987.

Concerns about the U.S. economy slipping into recession following last Friday’s disappointing jobs report triggered the significant weakness in the overseas markets.

Shares of AI darling and market leader Nvidia (NVDA) plunged by 6.4 amid an unwinding of the artificial intelligence trade that recently helped the markets to record highs.

Tech giant Apple (AAPL) also tumbled by 4.8 percent after Warren Buffett’s Berkshire Hathaway revealed it sold nearly half its stake in the iPhone maker.

Stocks regained some ground following the release of a report from the Institute for Supply Management showing service sector activity in the U.S. turned positive in the month of July.

The ISM said its services PMI climbed to 51.4 in July from 48.8 in June, with a reading above 50 indicating growth. Economists had expected the index to rise to 51.0.

“The uptick in the ISM services index will do little to reverse market jitters of a recession in the wake of Friday’s employment report, but it aligns with our view of an economy in transition rather than one on the brink of collapse,” said Matthew Martin, U.S. Economist at Oxford Economics.

He added, “Expectations for aggressive rate cuts in September are overdone, and we expect the Fed to move forward with a 25bps cut at the meeting.”

Telecom stocks showed a substantial move to the downside on the day, dragging the NYSE Arca North American Telecom Index down by 4.2 percent.

Considerable weakness is also visible among airline stocks, as reflected by the 4.1 percent nosedive by the NYSE Arca Airline Index.

Networking stocks also saw significant weakness, with the NYSE Arca Networking Index plunging by 3.8 percent.

Tobacco, oil service and computer hardware stocks also moved notably lower amid continued broad based selling pressure on Wall Street.

Commodity, Currency Markets

Crude oil futures are slipping $0.40 to $72.54 a barrel after falling $0.58 to $72.94 a barrel on Monday. Meanwhile, after tumbling $25.40 to $2,444.40 an ounce in the previous session, gold futures are edging down $1.60 to $2,442.80 an ounce.

On the currency front, the U.S. dollar is trading at 144.65 yen compared to the 144.18 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0910 compared to yesterday’s $1.0952.

Asia

Asian stocks recovered some lost ground on Tuesday after a brutal global sell-off the day before on heightened Middle East tensions, an unwinding of yen carry trades, lukewarm tech earnings, and concerns about slowing U.S. economic growth.

The Japanese yen snapped a five-day gain and gold edged down slightly, while oil rebounded from seven-month lows on concerns about supply disruptions from rising tensions in the Middle East.

China’s Shanghai Composite Index rose 0.2 percent to 2,867.28, while Hong Kong’s Hang Seng Index slipped 0.3 percent to 16,647.34.

Japanese markets staged a sharp recovery after plunging the most in 37 years the previous day. The Nikkei 225 Index soared 10.2 percent to 34,675.46 after having plummeted more than 12 percent on Monday.

The broader Topix Index settled 9.3 percent higher at 2,434.21, led by automakers and technology stocks. Toyota Motor, Honda Motor and Tokyo Electron spiked 13-17 percent.

Seoul stocks rebounded from the previous day’s sell-off. The Kospi surged 3.3 percent to 2,522.15 after crashing a whopping 8.8 percent on Monday. SK Hynix and Hyundai Motor both rose around 5 percent.

Australian markets eked out modest gains after the Reserve Bank of Australia kept interest rates steady but warned the economy remained overheated.

The benchmark S&P/ASX 200 Index rose 0.4 percent to 7,680.60 after its worst two-day sell-off since the coronavirus pandemic. The broader All Ordinaries Index gained 0.4 percent to close at 7,890.10.

Consumer discretionary stocks performed well, while energy stocks suffered heavy losses.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index ended down 0.2 percent at 12,245.76.

Europe

European stocks were little changed on Tuesday after having hit six-month lows in the previous session on heightened Middle East tensions, an unwinding of yen carry trades, lukewarm tech earnings, and concerns about slowing U.S. economic growth.

The pan European STOXX 600 was marginally lower at 486.86 after logging its steepest three-day decline since June 2022 on Monday.

The German DAX slipped 0.1 percent, France’s CAC 40 shed 0.6 percent and the U.K.’s FTSE 100 was down 0.4 percent.

The dollar edged up slightly, while U.S. Treasury yields fell ahead of the auction of $58 billion of three-year notes later in the session.

In corporate news, Swiss staffing firm Adecco climbed 2.2 percent after posting better-than-expected Q2 results.

Italian bank Monte dei Paschi di Siena surged 6.6 percent after raising its profit outlook.

InterContinental Hotels Group rose about 1 percent in London after the Holiday Inn owner reported a 3.2 percent rise in revenue per available room in the second quarter.

Asset manager Abrdn rallied 3.2 percent after reporting better-than-expected profit and lower costs for the first half of the year.

Construction materials provider SIG declined 1.8 percent after reporting a loss in its half-year results.

Domino’s Pizza slumped 6.6 percent as it forecast its annual profit to be at the lower end of market expectations.

German pharmaceutical and life sciences giant Bayer edged up slightly after reporting mixed results for the second quarter and reiterating group guidance.

In economic releases, Germany’s factory orders rebounded in June due to the significant improvement in the auto industry, data from Destatis revealed.

Manufacturing orders increased by more-than-expected 3.9 percent on a monthly basis in June, in contrast to the revised 1.7 percent decrease in May. Orders were forecast to climb only 0.7 percent.

Separately, Eurostat reported that Eurozone’s retail sales dropped at an annual rate of 0.3 percent in June after increasing by 0.5 percent in May.

U.S. Economic News

Reflecting a sharp increase in the value of exports, the Commerce Department released a report on Tuesday showing the U.S. trade deficit narrowed in the month of June.

The Commerce Department said the trade deficit shrank to $73.1 billion in June from a revised $75.0 billion in May.

Economists had expected the trade deficit to decrease to $72.4 billion from the $75.1 billion originally reported for the previous month.

The narrower trade deficit came as the value of exports jumped by 1.5 percent to $265.9 billion, while the value of imports rose by 0.6 percent to $339.0 billion.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $58 billion worth of three-year notes.