2-7-18 9:04 AM EST | Email Article

By Victor Reklaitis, MarketWatch , Ryan Vlastelica

Analyst: stocks are adjusting to a world with inflation, but aren't worried about a recession

U.S. stock-index futures pointed to a lower open on Wednesday, suggesting the recent dramatic swings on Wall Street were nowhere near over.

The stock market is struggling to stabilize after heavy selling on Friday and Monday, and after a wild day of trading Tuesday. Analysts have pinned the drop in part on rising bond yields amid signs of inflation, as they also note that equities were due for a pullback after scoring big gains in January and throughout 2017.

Check out:Why the Dow has suddenly become a hot mess (http://www.marketwatch.com/story/why-the-stock-market-has-suddenly-become-a-hot-mess-2018-02-06)

What are the main benchmarks doing?

Dow Jones Industrial Average futures dropped by 96 points, or 0.4%, to 24,690, after earlier being down by more than 200 points. S&P 500 futures shed 13 points, or 0.5%, to 2,681.5, while Nasdaq-100 futures lost 28.25 points, or 0.4%, to 6,625.

On Tuesday, the Dow jumped by 567 points, or 2.3%, for its biggest percentage gain in two years (http://www.marketwatch.com/story/dow-futures-swing-wildly-in-battle-to-recover-from-historic-selloff-2018-02-06). That followed Monday's drop, which was the blue-chip average's largest percentage drop since August 2011. At current levels, the Dow stands 6.4% below last month's record close.

The S&P 500 closed 1.7% higher on Tuesday, while the Nasdaq Composite gained 2.1%.

Read:50-year Wall Street veteran says this sure feels like a stock-market bottom (http://www.marketwatch.com/story/50-year-wall-street-veteran-this-sure-feels-like-a-stock-market-bottom-2018-02-06)

And see:Here's how U.S. stocks typically perform in the aftermath of a major rout (http://www.marketwatch.com/story/heres-how-the-stock-market-typically-performs-in-the-aftermath-of-a-major-rout-2018-02-06)

What are other assets doing?

European stocks traded modestly higher (http://www.marketwatch.com/story/european-stocks-snap-7-day-selling-spree-after-wall-street-rebound-2018-02-07), while Asian markets finished mixed (http://www.marketwatch.com/story/asian-markets-shoot-higher-following-wall-streets-rebound-2018-02-06) after earlier gains faded. Gold futures and oil futures were moderately lower, while the ICE U.S. Dollar Index gained.

What are strategists saying?

"The market was positioned for great earnings, great growth, and no inflation or rates moving up to any meaningful degree. Now that goldilocks environment is gone, and we're back in a normal environment where we're getting both strong growth and higher rates. That readjustment is bringing some jitters," said Alec Young, managing director of global markets research at FTSE Russell.

"We're still in an environment with synchronized global growth--no one is talking about a recession right now--but the days of smooth sailing where the market goes up every day are probably over."

What could help drive markets?

Political worries might pressure the market somewhat, as a partial shutdown of the federal government lies ahead if lawmakers don't agree on spending measures by midnight Thursday.

But the House passed a temporary bill late Tuesday (http://www.marketwatch.com/story/house-passes-temporary-spending-bill-to-avoid-shutdown-2018-02-06), and Senate Majority Leader Mitch McConnell (R., Ky.) and Minority Leader Chuck Schumer (D., N.Y.) have said they are close to a deal (https://www.wsj.com/articles/house-gop-plans-spending-vote-to-fund-military-1517913000). A brief partial shutdown last month didn't weigh on the market that much (http://www.marketwatch.com/story/dow-futures-retreat-as-government-shutdown-stretches-into-3rd-day-2018-01-22).

There are no top-tier economic reports expected on Wednesday, but three Federal Reserve officials are slated to make remarks. New York Fed President William Dudley is taking part in a panel discussion on banking culture at 8:30 a.m. Eastern Time, Chicago Fed President Charles Evans is giving a speech to bankers in Iowa at 11:15 a.m. Eastern, and San Francisco Fed President John Williams is talking to community leaders in Hawaii at 5:20 p.m. Eastern.

Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)

Which stocks look like key movers?

Shares in Snap Inc.(SNAP)surged 23% in premarket action after the parent for messaging app Snapchat posted better-than-expected quarterly results (http://www.marketwatch.com/story/snap-stock-surges-nearly-30-after-sales-and-earnings-beat-2018-02-06) late Tuesday.

See: A year after IPO, Snap shows progress but still has many issues (http://www.marketwatch.com/story/a-year-after-ipo-snap-shows-progress-but-still-has-many-issues-2018-02-06)

Walt Disney Co.'s stock (DIS)was 2% higher in premarket trading after the entertainment giant reported stronger-than-anticipated earnings (http://www.marketwatch.com/story/disney-beats-on-earnings-stock-gains-slightly-2018-02-06) late Tuesday, while Chipotle Mexican Grill Inc.(CMG)tumbled 8% after the burrito chain's profit topped views and revenue met expectations (http://www.marketwatch.com/story/chipotle-beats-q4-expectations-as-even-avocado-prices-helped-2018-02-06).

See:With Fox merger and ESPN streaming effort, Disney has a confusing mess (http://www.marketwatch.com/story/with-fox-merger-and-espn-streaming-effort-disney-has-confusing-mess-to-sort-out-2018-02-06)

Wynn Resorts Ltd.'s stock (WYNN)rose 8% premarket after Steve Wynn resigned late Tuesday (http://www.marketwatch.com/story/steve-wynn-resigns-as-ceo-of-wynn-resorts-2018-02-06) as chief executive and chairman following allegations last month of sexual misconduct.

Shares in Tesla Inc.(TSLA)could see active trading as the maker of electric cars is scheduled to post earnings after the bell. On Tuesday, a Tesla Roadster was launched into space (http://www.marketwatch.com/story/check-out-this-view-as-a-tesla-roadster-hurtles-through-space-2018-02-06)as a dummy payload and publicity stunt.

See:SpaceX successfully launches massive Falcon Heavy rocket (http://www.marketwatch.com/story/spacex-successfully-launches-massive-falcon-heavy-rocket-after-years-of-anticipation-2018-02-06)

And read:7 big worries that could hammer Tesla's stock price (http://www.marketwatch.com/story/7-big-worries-that-could-hammer-teslas-stock-price-2018-02-07)

Shares in Hasbro Inc.(HAS)fell 3% premarket after the toy maker beat fourth-quarter profit expectations but missed on revenue (http://www.marketwatch.com/story/hasbros-stock-drops-after-profit-beat-but-revenue-missed-2018-02-07), while Michael Kors Holdings Ltd.(KORS)jumped 8% as the fashion house's quarterly profit and revenue topped forecasts (http://www.marketwatch.com/story/michael-kors-earnings-and-sales-beat-expectations-2018-02-07).

Media company Tronc Inc.(TRNC)could make moves following news it's in advanced talks to sell the Los Angeles Times (http://www.marketwatch.com/story/tronc-in-talks-to-sell-los-angeles-times-to-investor-for-500-million-2018-02-06) to billionaire Patrick Soon-Shiong for around $500 million.

 

(END) Dow Jones Newswires

February 07, 2018 09:04 ET (14:04 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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