US stock futures were little changed on Wednesday morning after the market staged a major midday turn on Tuesday, with falling bond yields buoying growth stocks, and ahead of a slew of economic data.
Futures linked to the Dow Jones Industrial Average were close to the flatline. S&P 500 futures and Nasdaq 100 futures were also roughly flat.
In regular trading, the Dow shed 129 points to start the holiday-shortened week, parsing steeper losses from earlier in the session. The S&P 500 rebounded from a 2% loss in the last hour of trading to end the day up 0.2%. The tech-heavy Nasdaq Composite outperformed, rising 1.75%.
Investors continued to worry about whether the market is on the verge of a recession after the benchmark US 10-year Treasury yield fell below the 2-year yield. The so-called yield curve inversion has historically been a warning sign that the economy could fall or has already entered a recession.
Oil prices fell below $100 a barrel on Tuesday, further reflecting a possible economic slowdown. Energy stocks were the biggest losers on Tuesday. The sector as a whole fell 4%. It was the best-performing sector in the S&P 500 for the first half of the year, the benchmark index’s worst first half since 1970.
However, Wall Street analysts say a recession could be mild. On Tuesday, Credit Suisse said it saw the US dodging a recession as it lowered its year-end target for the S&P 500 to reflect the impact of higher costs of capital on stock valuations.
“[The market] has prepared for it [a recession], and now it might actually be accepted, the idea is let’s just get it over with, we’re going to have a recession, let’s do it. Let’s clean up the excesses and start over,” Yardeni Research’s Ed Yardeni said on CNBC’s Closing Bell: Overtime.
“The market is starting to look to next year and that could very well be a year of recovery from whatever this recessionary environment may be,” he added. “We’re all doing a sort of Hamlet recession – to be or not to be. I think there will be a slight recession.”
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Cameron Dawson, NewEdge Wealth’s chief investment officer, echoed that sentiment.
“Do we have some sort of drawdown that seems to be in the 30% range, which is the average for recessions, or something that’s more like a 50% drop, which is what we saw in the early 2000s and 2008 where we had it ? two debt crises?” She said. “We don’t see a debt crisis. We think we might start to find a reading around the 3,400-3,500 level because that takes us back to the pre-Covid highs.”
No major earnings reports are scheduled for Wednesday, but there will be a slew of economic reports including minutes from the June Federal Reserve meeting this afternoon.
Investors are also looking forward to the latest Mortgage Bankers Association Mortgage Purchase Index numbers on Wednesday at 7:00 a.m. ET. The latest manufacturing PMI data from Markit and the Institute for Supply Management will be released at 9:45 am and 10:00 am respectively. The Job Openings and Labor Turnover Survey (JOLTS) will also be released at 10:00 am