US stock futures bounce back after rout that sent the S&P 500 to 1-year lows, while bitcoin struggles at $30,000

  • US stock futures rallied Tuesday, suggesting the S&P 500 could pare some of the previous day’s losses.
  • The benchmark index fell to a one-year low on Monday, driven by investor fears over inflation and growth.
  • Leading cryptocurrency bitcoin broke below $30,000 as crypto investors booked profits.

US stock index futures rallied on Tuesday, suggesting a modest recovery at the open from the previous day’s rout that drove the S&P 500 to a one-year low, as investors bought back technology stocks and other beaten down sectors.

Meanwhile, bitcoin floundered around $30,000, amid a wider crypto market sell-off.

The S&P 500 fell 3.2% to its lowest in a year on Monday, marking its largest three-day fall since March 2020, when the pandemic first struck markets and the economy. So-called growth stocks, such as tech shares, came under intense fire. 

US stock futures rallied on Tuesday, with those on the S&P 500 up 1% and on the Dow Jones 0.9% higher. Nasdaq 100 futures gained 1.6%, indicating the index could pare some of Monday’s near-4% decline.

But that strength could be short-lived, analysts said.

“The probability of a tactical bear market rally is certainly elevated, but that’s what it will be — a bear market rally and one where traders will sell in to — ‘buy the dip’ has morphed into ‘sell on rallies’,” Chris Weston, a strategist at brokerage Pepperstone, said.

Investors are awaiting data on US consumer inflation due Wednesday that could be instrumental in determining how aggressively the Federal Reserve raises interest rates. 

Economists expect to see a rise of 8.1% in a basket of key consumer goods and services in April, thanks to an easing in the cost of things such as fuel and second-hand cars. That’s below March’s 8.7% increase, but would still be at a 40-year high.

Meanwhile, the dollar hovered around this week’s 20-year highs, buoyed by deteriorating investor confidence and growing chances the Fed will tackle inflation with big rate rises. That makes the US currency more appealing to overseas buyers, as it could bring better returns than they would get on assets in their own currencies.

The dollar index eased 0.1% on the day, but remained within sight of Monday’s peak at 104.187, its highest since late 2002.

“Not only is the Fed expected to hike rates at every meeting this year, but concern surrounding an economic slowdown in China are causing investors to favor the safe-haven assets, chief among them at present is the dollar,” Mathew Ryan, a strategist at financial services provider Ebury, said in a note.

Such is the outlook for US monetary policy that even a softer inflation reading wouldn’t pose much of a headwind for the dollar, according to NatWest Market’s Neil Parker. 

“The figures though might disappoint consensus expectations, which would, in my opinion, prompt a renewed rally in the USD against other majors as it would likely further embed expectations of significant additional monetary tightening from the Federal Reserve,” he said in a daily note.

China’s battle to contain an outbreak of COVID-19 across the country has resulted in forced lockdowns in major financial and trading hubs, and cast doubt on the government’s ability to reach its growth target of 5.5% this year. 

In turn, this has weighed on investor sentiment, driving China’s yuan to two-year lows against the dollar this week. 

Cryptocurrencies have suffered a similar fate in recent weeks. Bitcoin dropped briefly below $30,000 on Tuesday, hitting its lowest since last July, as investors cashed out. The most-traded crypto was last down 5.4% at $31,809, having hit an overnight low of $29,994, according to CoinMarketCap.

In commodities, gold benefited from the dip in the dollar, and rose 0.2% to $1,862 an ounce. That provided some respite, after mounting expectations for a steep rise in US rates drove the price close to three-month lows last week.

Brent crude oil, which has gained 35% this year due to concern about a supply shortfall from sanctions on Russia, was last 0.6% at $105.36 a barrel, while WTI futures fell 0.5% to $102.62.

Read more: The boss of a $2.2 billion asset manager who’s called the last two big bear markets lays out why he’s moved virtually all his positions into cash. He shares what he wants to see before buying back in