Stock market news today: Stocks set for bounce back after 3-day rout as tech leads futures higher
08/06/2024 18:39
US stocks were poised for a rebound from a two-day rout that wiped out a healthy chunk of 2024's market gains
US stocks were poised for a rebound from a three-day rout that has wiped out a healthy chunk of 2024's market gains. Futures tied to the S&P 500 (ES=F) were up 0.9%, while those on the tech-heavy Nasdaq (NQ=F) rose 1%. Dow Jones Industrial Average (^DJI) futures (YM=F) rose 0.8%.
Stocks got crushed on Monday, part of a two-day tailspin on Wall Street that served as a boisterous reaction to fresh concern over the health of the US economy and its labor market. The S&P 500 (^GSPC) had its worst day since 2022 and capped its worst start to any month since 2002.
The benchmark has shed around 6% in the past three sessions, bringing year-to-date gains back to around 9%.
Though stock futures ebbed from a larger overnight rally, early signs pointed to a recovery. Wall Street's "fear gauge" — the CBOE Volatility Index (^VIX) — touched its highest level since the early days of the COVID-19 pandemic on Monday. On Tuesday, it fell back to earth, to levels seen often in 2022.
Some of the market's biggest names also were aiming for a rejuvenation. The "Magnificent 7" stocks lost more than $650 billion in market cap on Monday. On Tuesday, that looked set to change. Nvidia (NVDA), which led the way down, rose over 3% before the market open. Tesla (TSLA), Microsoft (MSFT), and Meta (META) all rose more than 1%.
Cryptocurrencies, which weren't spared from the rout, also rose in tandem with the optimism. Bitcoin (BTC-USD) was up 7%, rising back above the $55,000 level.
The coming days — and weeks — will provide key signals for what comes next. As Yahoo Finance's Myles Udland writes, stocks still have the same problem waking up Tuesday that they did Monday: the Federal Reserve. The Fed has come under mounting pressure to act, as around three-quarters of traders now expect a 50-basis-point rate cut at its next meeting.
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The aftermath from Monday's rout
The mindset of Wall Street generally cracks me up.
On Monday as the market was melting down, pundits were all but predicting a fourth quarter recession and the onset of a bear market. Today, I awake to read many of these same pundits talking about calm returning to markets!
The reality is that when the Dow drops more than 1,000 points in a single session (as it did on Monday, in case you forgot already) it suggests broken confidence. And that confidence isn't repaired overnight — it takes time and wild short-term swings in stocks. So be patient here and question anyone saying the coast is clear.
To that end, I liked what the JP Morgan team put out this morning in terms of a guide for assessing a potential market bottom:
"We currently don’t have the full set of ingredients of a market bottom, such as the slope of the 20-day moving average flattening, market breadth hitting and bouncing off lows, positioning and sentiment washout, convincing highs in the put/call ratio, coming out of VIX inversion, etc. There is good reason to worry about this correction, as unemployment bottoming off cycle lows has historically led to recession, while the previous market assumption was that the unemployment rate uptick reflected labor supply normalization. In equities, we see the position-heavy reversal of momentum trades and defensive leadership signaling worries about growth risk."
Google ruling aftermath
Alphabet (GOOGL) shares are hanging in there after a legal blow late Monday.
A judge found the company's search and ad businesses violated antitrust law. More analysis from Yahoo Finance's Alexis Keenan and Dan Howley here.
Wall Street mostly appears to be taking the news in stride — no downgrades or estimate cuts this morning.
But, I do think RBC analyst Brad Erickson brings up key points for those longer-term investors in the stock:
"Whatever multiple an investor was thought to be paying for the search business, we'd think that value would likely have to be discounted by some amount given the implications of today's announcement. We've been saying for some time that with all of the AI chatbot competitors out there, what really mattered for the GOOGL bear case was the distribution of its search engine as opposed to debating which bot was better. In this case, while it's presumable/possible that the company could lose a few points of share over the next few years to the degree that the DOJ successfully removes GOOGL's default status, we'd think it's very unlikely that a more material portion of searches move away from Google given users' familiarity and overall Google ecosystem halo. With that said, Apple's unveiling of ChatGPT as an initial preferred partner for iOS 18 technically implied a slightly shrinking moat for GOOGL where today's news could be looked at in the same vein (Apple's hedge now looks rather prescient)."
