2-6-18 4:57 AM EST | Email Article

By Barbara Kollmeyer, MarketWatch

Asia joins down market, with Nikkei sinking 4.7%

U.S. stock futures pointed to a slightly higher open in extremely volatile trading on Tuesday, with Dow Jones Industrial Average futures erasing an 850-point loss to gain almost 20 points.

That's as global equities picked up the selling baton from historic losses on Wall Street on Monday, with sharp losses across Asia and Europe.

What are the main benchmarks doing?

Down to as low as 23,088 earlier, Dow Jones Industrial Average futures were up 19 points, or 0.1%, to 23,957. S&P 500 futures also completely reversed an earlier drop and rose 17.05 points, or 0.7%, to 2,623.50. Nasdaq-100 futures jumped 52.50 points, or 0.8%, to 6,484.25.

In a brutal session Monday, the Dow plunged more than 1,500 at the low point (http://www.marketwatch.com/story/us-stocks-poised-for-fresh-selloff-as-dow-futures-slide-120-points-2018-02-05), as investors appeared to panic out of stocks. The index finished down 1,175.21 points, or 4.6%, to 24,345.75, marking its biggest one-day point drop ever. The S&P 500 dropped 113.19 points, or 4.1%, to 2,648.94. Before Monday, it had enjoyed the longest stretch without a 5% pullback in 20 years, but is now down more than 5% from its all-time intraday high (http://www.marketwatch.com/story/sp-500-registers-first-5-pullback-in-more-than-a-year-2018-02-05) of 2,872.87 on Jan. 26.

The S&P 500 and Dow also both turned negative for the year.

The Nasdaq Composite Index shed 273.42 points on Monday, or 3.8%, to end at 6,967.53, but remains 0.9% higher for the year.

Read:Here are the biggest losers among Dow and S&P 500 stocks in Monday's rout (http://www.marketwatch.com/story/here-are-the-biggest-losers-among-dow-and-sp-500-stocks-in-mondays-rout-2018-02-05)

What's driving the markets?

The volatile trading on Tuesday came as traders digested the steep selloff on Monday. The weakness already began with last week when data showing a faster-than-expected pick-up in sparked fears that the Federal Reserve could embark on a quicker route to interest-rate hikes.

Yields were climbing again on Tuesday. The yield on the 10-year Treasury note last rose 6 basis points to 2.766%, after falling 5.8 basis points to 2.794% on Monday as investors sought shelter from tumbling equity prices. Yields move inversely to price.

Some strategists have been warning for weeks that the seemingly unstoppable rally was due for a pullback. A spike in volatility appeared to push some traders to push the sell button. The Cboe Volatility Index , Wall Street's so-called fear gauge, surged 116% to 37.32 on Monday, which marked its loftiest level since August 2015, according to FactSet.

The VelocityShares Daily Inverse VIX Short-Term ETN (XIV) , used to bet on stable stock prices, slumped 84% in premarket trading.

However, futures for the Cboe though, indicated that fear-gauge was pulling back. Futures fell 25% to a level of 24.70.

Opinion:Tony Robbins on stock market corrections: Get used to them (http://www.marketwatch.com/story/tony-robbins-on-stock-market-corrections-get-used-to-them-2018-02-02)

What were strategists saying?

"I currently see no reason why U.S. futures can't maintain the gains. As opposed to seeking reasons why it has risen, it may be more a reflection of investors struggling to justify the losses we've seen over the last 48 hours. The rebound may suggest that the move was overdone, assuming it is sustained and we don't see another move lower," said Craig Erlam, senior market analyst Oanda, in emailed comments.

"Although however tempting it may be to call this the start of the much needed correction many analysts have been calling for, those look to short the indexes must be cautious going into tomorrow's session in case of bounce," said James Hughes, chief market analyst at AxiTrader, in a note to clients.

"Heavyweight players and institutional investors -- especially in the U.S. -- seem to treat this selloff as nothing out of the ordinary as 5% corrections in the stock markets tend to happen more often than everyday people realize. However, if this perfect storm continues to develop and a new reality of higher bond yields and more aggressive monetary tightening sets in then the pain in the equities will persist," said Konstantinos Anthis, on the research team at ADS Securites in a note to clients.

What are other assets doing?

European stocks were down across the board. The Nikkei 225 index slid 4.7% as most Asian markets finished in the red (http://www.marketwatch.com/story/asian-markets-fall-hard-continuing-global-selloff-2018-02-05). Hong Kong's Hang Seng Index logged a 5.1% plunge.

Gold futures rose $7 to $1,343.60 an ounce, while oil futures were down 0.5%. The ICE U.S. Dollar Index dipped slightly, while the dollar was down about 0.6% against the Japanese yen


(END) Dow Jones Newswires

February 06, 2018 04:57 ET (09:57 GMT)

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