The Tuesday Market Minute
- Wall Street rebounds from yesterday's sell-off with defensive early gains powered by healthcare, real estate and utility stocks.
- Global stocks stabilize from biggest single-day decline in two months as focus shifts from Evergrande concerns to Fed policy meeting.
- Evergrande shares steady in Hong Kong as chairman vows to see through "darkest time" ahead of Thursday's $150 billion payment deadline.
- The Fed begins its two-day policy meeting with a likely focus on the Delta impact to growth prospects and the impact on prices from global supply chain chaos.
- Johnson & Johnson says a second dose of its coronavirus vaccine showed a significant boost to overall efficacy in a large-scale U.S. trial.
- Universal Music Group shares soar 35% on their European debut, valuing the company at more than $55 billion.
Wall Street futures rebounded modestly Tuesday as investors looked to claw back losses from the biggest single-day decline in nearly four months amid ongoing concerns over the fate of China's indebted property giant Evergrande and the start of the Federal Reserve's crucial policy meeting.
The early gains were defensive in nature, however, with healthcare, real estate and utilities pacing the opening hour advance and suggesting caution on risk remains as the Fed kicks-off its two-day policy meeting in Washington.
Global stocks stabilized Tuesday, as well, with Asia booking modest gains -- even as mainland China markets remained closed for a public holiday -- and Europe getting a modest bounce from the loosening of travel restrictions with the United States and an impressive debt for newly-listed Universal Music Group, which now boasts a market value of more than $55 billion.
A late-hour rally on Wall Street pared some of yesterday's declines, the largest since May, as investors took a second look at the impact of China Evergrande's impending default and scooped up cheap stocks heading into tomorrow's announcement from the Fed.
Further support Tuesday could also come from Washington, where House Democrats are working on a bill they say would not only fund the government after the September 30 budget deadline but also suspend the looming debt ceiling.
Markets may also be sneaking early looks ahead to the third quarter earnings season, which begins next month, when collective S&P 500 profits are forecast to grow by 29.5% from last year to a share-weighted $413.4 billion.
"We’ve been arguing that the US economy is in good shape -- the recent COVID-surge notwithstanding -- and continuing to improve, however, markets were likely to experience at least a 5% pullback (potentially more) at some point this year and that it was worth keeping focused on the bigger picture," said Chris Zaccarelli, CIO for the Independent Advisor Alliance.
"There will be many who will try to time the market, but it is exceedingly difficult to do it consistently and without losing more than can be gained by avoiding the occasional air pocket in an otherwise spectacular bull market that won’t be interrupted until the next recession is imminent," he added.
The Dow Jones Industrial Average was marked 60 points higher in late morning trading Tuesday while the broader S&P 500 earned back 10 points from yesterday's slump, which pulled the benchmark into a month-to-date decline of around 3.65%.
The Nasdaq Composite gained 70 points as some of the big tech names that lead yesterday's decline moved higher as benchmark 10-year note yields eased to 1.306%.
Lennar (LEN) - Get Lennar Corporation Class A Report shares were a notable mover Tuesday, falling 1.5% to $96.76 each after the country's second-largest homebuilder added its name to the list of companies concerned about supply chain disruptions to the housing market.
Johnson & Johnson (JNJ) - Get Johnson & Johnson (JNJ) Report shares were also in focus, rising 1% to $165.30 each, after it published data showing that a second short of its coronavirus vaccine provided a significant increase in protection against the disease in a large-scale U.S. trial.
DraftKings DKNG shares slumped 5.8% lower following a report that the U.S.-based online gaming group is planning a $20 billion takeover bid, financed mostly with stock, for Britain's Entain Plc.
Away from equities, oil prices were also on the rise following yesterday's steep declines, helped by a modestly weaker dollar and news of an easing of arrival restrictions for fully-vaccinated travelers from around 33 countries, including China, India, Britain and the European Union, which could spark a late year boom in air traffic demand.
WTI futures for November delivery were marked 8 cents higher from Monday's close to change hands at $70.22 per barrel, while Brent contracts for the same month added 10 cents to trade at $74.03 per barrel.