Stock futures fall in volatile trading

US stock futures fell, putting the S&P 500 back on track to flirt with bear market territory.

Futures for the S&P 500 fell 0.9% on Tuesday, while those for the Dow Jones Industrial Average lost 0.6%. Contracts for the tech-heavy Nasdaq-100 were down 1.5%.

On Monday, major US indices rose, giving investors some breathing room after last week’s volatile trading session. But on Tuesday, negative sentiment returned to markets. Asian indices fell globally, weighed down by losses from technology stocks. The European stock markets were also lower.

snap‘s

shares fell 30% premarket, following an earnings and revenue warning on Monday, in which the company noted that the macroeconomic environment has deteriorated more than expected. The losses trickled down to other tech stocks, with Meta Platforms falling 7% before the opening bell and the Google parent alphabet falling 3.8%. Advanced Micro Devices AMD 1.68%

lost 1.8%.

Investors are faced with a series of signals as they attempt to chart the trajectory of the US economy. Many have become concerned that the Federal Reserve’s plans for monetary tightening to curb inflation could send the economy into recession. That was one of the catalysts for the ruthless year for the US stock market, with the S&P 500 falling 17% from its January high, based on Monday’s closing price.

There was, however, a glimmer of optimism, such as on Monday when JPMorgan Chase said US consumers appear to be in good financial health. But that optimistic image was quickly offset by the disclosure of Snap, a company that had never issued a revenue warning before.

“We’ll be on this rollercoaster for a while as investors cling to more optimistic data points and face new disappointments as another bleak reading arrives,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown. “We don’t yet know the full path of interest rate hikes or how resilient consumers will be.”

Despite the broad sell-out of pre-market technology on Tuesday, there were bright spots in the market. Zoom Video Communications rose 5.8% before the opening bell after the video conferencing services company raised its earnings outlook. Elsewhere in the market, Best Buy rose 8.5% after reporting sales that exceeded analyst expectations.

Later Tuesday, investors will receive new commentary from Fed Chair Jerome Powell, who will make comments at an economic summit in Las Vegas. Investors will look for new clues about his outlook for inflation, the economy and the path of rate hikes.

Several economic data is also expected Tuesday, including data on US new home sales and polls of US manufacturing activity. Earlier Tuesday, data firm S&P Global said the Purchasing Managers Index for the Eurozone’s services and manufacturing sectors fell in May from the previous month. Factories in Europe and Japan reported a weakening in new orders amid higher costs and prices, a sign that manufacturing output will slow further in the coming months.

Investors are now closely monitoring whether the S&P 500 is entering bear market territory, defined as a decline of at least 20% from a recent high. On Friday, the benchmark index came close to finishing in a bear market, although it was saved by a rally at the end of the session.

Tuesday’s sell-off in technology stocks in the pre-market session caused investors to pick up government bonds, with yields on benchmark 10-year US Treasury notes falling from 2.857% Monday to 2.815% from 2.857%. Yields fall when bond prices rise.

Gold, considered another port asset, rose 0.4% to $1,855.60 per troy ounce.

Traders worked on the floor of the New York Stock Exchange on Monday.


Photo:

Spencer Platt/Getty Images

Brent oil, the international oil benchmark, rose 0.4% to $113.84 a barrel, reversing losses from earlier in the session.

“You’ve got this push and pull with oil prices – oil prices are being kept somewhat low by global growth, which doesn’t mean much for the health of the global economy,” Ms Streeter said. “But at the same time, it’s not going down further due to concerns about tight supply.”

In Europe, the pan-continental Stoxx Europe 600 lost 0.5%. In Asia, Hong Kong’s Hang Seng fell 1.7%. Japan’s Nikkei 225 lost 0.9%, while China’s Shanghai Composite lost 2.4%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

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