Equity futures opened slightly higher on Tuesday, drifting towards a rally led by technology stocks recovering from their recent declines.
Contracts on the Nasdaq started the overnight session with a tick above the flat line after the index closed the normal rise of 3.7% to achieve its best day since November. The jump occurred just a day after the index moved into a correction and closed more than 10% below the February record high. The S&P 500 also rose more than 1% on Tuesday, led by the consumer discretionary sector, as Tesla’s share rose 20% for its first rise in six sessions and its biggest increase in one session in more than one year.
While the Dow closed just a tick above the flat line on Tuesday, it ended modest weeks of better-than-the-other two major indices amid a broad revolution in cyclical and value-held stocks and away from growth and technology names.
The factors that initiate the rotation, namely the rapid rise in treasury yields and the concern of inflation and higher rates that weigh mainly on growth stocks, remain a focus for investors. Although the 10-year treasury yield retreated on Tuesday, it is still nearly 50 basis points above last month’s levels after a rapid rise. Frances Newton Stacy, director of strategy at Optimal Capital, told Yahoo Finance that Tuesday’s technically-led rally may have been just a “dead cat bounce” for the Nasdaq.
Other strategists agreed that inflation unrest and rising rates are likely to remain a central theme for investors this year.
“There’s the irony that everyone in year one doubts a market recovery and says how it can happen if the economy is not good, and then everyone struggles in year two to determine whether [the economy has] it just got too good too fast and it’s too hot, ” Brian Levitt, world market strategist at Invesco, told Yahoo Finance on Tuesday. “And the last few days have been the last story: the markets are disrupted by concerns about inflation and higher rates and the premature tightening of the Fed. And today, there is a slight delay over the story, as rates fall a bit and investors can start thinking about assets again for longer. ‘
“It’s going to be a debate all year, this idea of inflation and higher rates and the strengthening of the Fed,” he added. “And that could pose some challenges in the market, especially long-term assets. But in the end, I will not sleep on growth stocks, and I expect the structural growth industries to still be the long-term winners here.”
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18:04 ET Tuesday: Stock futures pick up
Here were the main movements in markets from 18:04 ET:
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S&P 500 futures (ES = F): 3,877.00, with 3.75 points or 0.1% higher
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Dow futures (YM = F): 31 857.00, with 46 points or 0.14% higher
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Nasdaq futures (NQ = F): 12,802.00, with 13.25 points or 0.1% higher
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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