Stock Futures Surge as Market Stabilizes After Selloff

21 Sep 2021 · 3rd Party Analysis

Stock Futures Surge as Market Stabilizes After Selloff


In Summary

  • Stock futures considerably higher as the US Federal Reserve meets today, Dow futures up over 1%
  • Investors expect the US central bank to present a timeline for tapering

Stock Futures Surge After the Sharp Market Selloff 

US futures on the major stock benchmarks rose early on Tuesday, following a steep selloff a day earlier. The slight improvement in the futures trading levels suggests US equity markets could pare back some of the losses realized as a result of increased concerns about the Chinese property sector.

Futures tied to the Dow Jones Industrial Average rose nearly 400 points, or over 1.1%, in pre-market trading, before the regular session on Tuesday. S&P500 futures were higher by 0.9%, while Nasdaq futures advanced 0.8% as investors are optimistic to buy the dip. 

The three main stock indexes tumbled on Monday when the mood turned sour due to Evergrande’s looming debt situation. The Chinese property developer is walking on thin ice as the burden of $300bn in debt is threatening its survival. 

Evergrande’s Time is Ticking Away

If Evergrande does not manage to raise enough funds to cover its interest payments this week, there are real chances it may go bankrupt. In this case, China’s troubled property market would be dragged into the crisis. The effect would most likely be felt in the global financial markets due to the company’s size and connections to foreign banks and investors.

Against that backdrop, the 30-stock Dow Jones declined nearly 1,000 points to its lowest on Monday. Buyers managed to pare some losses, and the stock benchmark closed down 1.8%, or a little over 600 points.  The other two major equity gauges, the S&P500 and the Nasdaq Composite finished the day lower by 1.7% and 2.2%, respectively. Investors rushed out of the risky assets and went into cash or safer alternatives, such as gold. The precious metal gained more than half a percent yesterday and continues to trade elevated, currently at $1,760 per ounce. 

Financial Markets Stabilize on Tuesday

In Europe today, stocks have been faring well, similarly to the futures markets on the other side of the Atlantic. The pan-European Stoxx 600 was up nearly 0.9% in the early hours of Tuesday’s session. Indexes for individual economies were all in the green across the old continent. France’s CAC40 led the gains, up more than 1.4% today, followed by Germany’s DAX, up 1.3%. 

In cryptocurrency, the price of bitcoin on Tuesday is seeking direction after it dropped about 9% on Monday. The leading token is now hovering above $43,000. Ether, the second-biggest cryptocurrency, is changing hands at $3,100, up about 1.7% on the day.

Fed Meeting to be Keenly Watched

In the meantime, Federal Reserve officials meet for their regular policy meeting today and tomorrow. They will be discussing the appropriate time for easing monetary policies, particularly the asset purchase scheme. The US central bank has signaled it is ready to unwind the vast monthly stimulus of $120bn in bonds by the end of the year. The two-day meeting will be concluded by Fed chairman Jerome Powell, with a press conference on Wednesday. 

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