Wall Street poised for a big rebound after China lowers interest rates
Wall Street was set for a sharp rally at the open Tuesday, with futures climbing more than 3% after China’s central bank cut interest rates in the wake of recent stock market turmoil.
Futures for the Dow Jones Industrial Average YMU5, +3.83% jumped 541 points, or 3.4%, to 16,249, indicating the benchmark DJIA, -3.57% could make up most of Monday’s 588.47-point plunge at the opening bell— its biggest one-day slump in four years. The average had dropped more than 1,000 points within the first minutes of Monday’s trading, after a serious market rout in China sparked a sharp selloff in global financial markets.
Futures for the S&P 500 ESU5, +3.96% and Nasdaq 100 index NQU5, +4.45% also suggested a market rebound on Tuesday, rising 64.55 points, or 3.5%, to 1,935.75 and climbing 167.75 points, or 4.2%, to 4,170, respectively. Both fell into correction territory during Monday’s carnage. Read: Tech stocks set for solid rebound after ‘Black Monday’
Futures for all three benchmarks were already trading firmly higher early in the morning, but got a further boost from the People’s Bank of China cutting its benchmark interest rates and reducing its reserve requirement ratio by 0.5 percentage point. The central-bank move comes as Chinese stock markets have shaved off a significant chunk of their value in recent days, fueled by concerns growth is slowing faster than expected in the world’s second-largest economy.
China’s Shanghai Composite Index SHCOMP, -7.63% closed 7.6% lower at 2,964.97 on Tuesday, even as the PBOC injected 150 billion yuan ($23.40 billion) into the financial system to ease selling pressure on the country’s stock market. The central bank’s interest-rate move came after Asian markets had closed.
Economists at Goldman Sachs, however, warned not to panic too much over the weaker Chinese growth outlook and instead use the current market jitters to look for new investments.
“Ultimately, the risks are mainly in China itself, and it is the overstated fear of the risk to global growth coming from China, and lack of confidence in its potential policy support, that we believe will create investment opportunities and a likely overshoot in valuations,” they said in a note dated Aug. 24.
In a separate note, the investment bank said it expects the S&P 500 SPX, -3.94% to rise 11% to reach 2,100 at year-end.
Other markets: European stock markets also recouped some of their losses, with the Stoxx Europe 600 index SXXP, +4.23% jumping 4.3%.
Crude-oil futures CLV5, +2.82% climbed back above $39 a barrel after settling below that level for the first time since February 2009 on Monday.
Gold GCZ5, -0.53% eased, while the dollar DXY, +0.65% traded mostly higher against other major currencies.
Tuesday’s data: At 9 a.m. Eastern Time, the Case-Shiller home-price index and FHFA house-price index are due, which will give an indication of the health of the housing market. Both releases are for June. New home sales for July, along with consumer confidence for August, are out at 10 a.m. Eastern.
There are no Fed speakers on the docket for Tuesday.
Movers and shakers: Shares of Best Buy Co. Inc. BBY, -3.02% rallied 11% premarket after the electronics retailer reported fiscal second-quarter profit and sales that rose well above expectations.
Toll Brothers Inc. TOL, -4.73% reported third-quarter earnings per share of 36 cents, down from 53 cents in the same period last year. Shares were down 2.8% in the premarket trade.
Sanderson Farms Inc. SAFM, -1.55% posted third-quarter earnings that missed analysts’ expectations.
Late Monday, The Wall Street Journal reported Twitter Inc. TWTR, -2.71% was contacted by the Securities and Exchange Commission earlier this year regarding how the microblogging company tracks user engagement. Twitter shares were up 4.5% ahead of the market open.
Shares of Netflix Inc. NFLX, -6.81% climbed 9.8% in premarket action, rebounding after the online-streaming service on Monday entered bear market territory and closed down 6.8%.
Source: MarketWatch
