S&P 500 futures experienced a relief rally following the broad index’s worst day in nearly two years, triggered by a global market sell-off. Many investors see Monday’s downturn as a necessary correction in a market characterized by high valuations and record highs. However, caution remains, with some experts, like Keith Lerner, Truist’s co-chief investment officer, warning that the market may still face further challenges. Lerner noted that significant damage has been done and that the recovery process will likely be gradual.

European stocks showed a mixed performance as markets attempted to recover from Monday’s significant sell-off. Banks and tech stocks, which had been among the hardest hit, managed to regain some ground in the early hours of trading. Tech stocks maintained their upward momentum, ending the day 1.03% higher. However, bank stocks faced a slight setback, closing 0.06% lower.

Japan’s stock market experienced a remarkable surge on Tuesday, with the Nikkei index soaring by 10.23% to close at 34,675.46. This marks its largest daily gain since October 2008 and the highest spike in index points ever recorded. Similarly, the Topix index saw a significant rise, finishing the day up 9.3% at 2,434.21. Meanwhile, the Reserve Bank of Australia announced that its cash rate would remain steady at 4.35%, providing a stable outlook for the Australian economy.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include CAT, GOLF, AHCO, ADNT, ALIT, ANIP, ARMK, ATI, ATKR, AVNT, BLDP, BAX, BLUM, BR, BRKR, CELH, CLVT, CEG, DK, ENR, NPO, EXPD, FIS, FWRG, FOXA, GENI, GFS, GPRE, GXO, HRMY, HSIC, HLMN, H, ICHR, IDXX, INGR, J, JLL, KVUE, KNE, LCII, MPC, TAP, MPLX, OGN, OC, PLNT, PTLO, QSR, SSTK, STWD, TPX, TWKS, BLD, TPG, TDG, TRMB, UBER, VMC, WLK, KLG, YUM, & ZTS.  After the bell include ACAD, ATGE, ABNB, AIN, AFG, AWR, AMGN, ANDE, AAOI, ALTM, ASH, AZPN, AIZ, ALAB, AXON, AZTA, BGS, BL, CRC, CERT, CRUS, CMP, CPNG, DVA, DVN, EVCM, EXEL, FLWY, FTNT, GMEN, GPRO, GO, HALO, HL, IAC, ILMN, INGN, CART, IFF, IRBT, JACK, LUMN, LAZR, MTTR, MOS, MRC, MYGN, OSUR, PR, PGNY, QLYS, RDDT, RDFN, RVLV, RIVN, SKY, STEM, LRN, RUN, TOST, COOK, TRIP, UPST, VFC, VECO & WYNN.

News & Technicals’

Morningstar DBRS analysts have cautioned that ongoing market declines following the recent global sell-off could potentially become a “self-fulfilling prophecy,” leading to a recession. Despite banks being one of the most heavily affected sectors, the analysts believe that the impact of market volatility on banks will likely be limited. The end of last week and Monday saw global markets tumble amid growing fears of a U.S. recession. However, there were signs on Tuesday that stocks might begin to recoup some of their losses, offering a glimmer of hope amidst the uncertainty.

Aramco reported a net income of $56.3 billion for the first half of the financial year, a decrease from $62 billion during the same period last year. Despite this decline, the company reaffirmed its second-quarter base dividend of $20.3 billion and announced a performance-linked dividend of $10.8 billion to be paid in the third quarter. Meanwhile, the kingdom’s gross domestic product has contracted for four consecutive quarters, a trend economists attribute largely to oil production cuts. This financial performance and economic context highlight the challenges faced by the oil industry and the broader economy.

John Schulman, who has been instrumental in refining the models behind OpenAI’s ChatGPT chatbot, is set to join the company’s safety and security committee following the departure of two safety leaders. Schulman emphasized that OpenAI’s executives have consistently demonstrated a strong commitment to safety and security. This move underscores OpenAI’s ongoing dedication to maintaining robust safety standards and ensuring the responsible development of its AI technologies.

West Texas Intermediate (WTI) has erased most of its gains for the year, while Brent crude is now down for 2024. This downturn has been driven by weak economic data from the U.S., which has sparked a sell-off in equity markets amid growing fears of a looming recession. Additionally, ongoing economic softness in China has been unsettling oil market traders, further contributing to the decline in oil prices. This combination of factors highlights the current volatility and uncertainty in the global oil markets.

The T2122 indicator continues to show a significant short term oversold condition so a relief rally is likely, but I would not expect it zoom all the way back.  With volatility so high, plan for very challenging price action with big point whipsaws.  With little on the economic calendar markets will focus with much more scrutiny on earnings results.  Plan carefully and have a great day.

Trade Wisely,

Doug