Stock futures gain as market attempts to keep rebound from lows going, Morgan Stanley rises

Stock futures rose early on Tuesday following a losing day as the market attempted to keep its rebound from the bear-market lows going.

Futures on the Dow Jones Industrial Average gained 165 points or 0.5%. S&P 500 futures edged up 0.5% and Nasdaq 100 futures advanced 0.4%.

The overnight action followed modest losses on Wall Street as a comeback rally stalled. The blue-chip Dow fell about 60 points, while the broader benchmark, the S&P 500, dipped 0.3% and the tech-heavy Nasdaq Composite lost 0.7% on Monday. The major averages rallied last week, posting their first positive week since May as major averages rallied off their lows for the year. The S&P 500 is still down 18% on the year but is up more than 7% from its low hit in mid-June.

“One of the trickier calls in this business is evaluating the difference between a bounce in a bear market vs. the start of a more durable advance,” wrote Chris Verrone, technical analyst with Strategas. “The current bounce, +8% over the last 4 trading days, has been impressive on the surface as most moves of this context tend to be, but again has yet to signal any resounding internal or leadership improvement.”

On Tuesday China relaxed its Covid restrictions for inbound travelers, cutting their quarantine time upon arrival by half to seven days. That gave travel and casino stocks a lift in premarket trading. Wynn Resorts and Las Vegas Sands rose more than 6% each. American, United and Delta Air Lines all added more than 1%.

Several major banks raised their dividends in response to successfully clearing this year’s Federal Reserve stress tests, including Bank of America, Morgan Stanley and Goldman Sachs. JPMorgan and Citigroup, however, said increasingly stringent capital requirements forced them to keep their dividends unchanged.

Morgan Stanley shares gained nearly 4% in premarket trading.

Investors will monitor more data on Tuesday including June consumer confidence and April home prices to gauge the health of the economy. Fears of a recession have increased lately as the Federal Reserve tries to combat surging inflation with aggressive rate hikes.

“Market bulls who have had the rug repeatedly pulled out from under them this year may understandably be suspect of the rally, since many of 2022’s upswings have quickly given way to fresh lows and this time may be no different,” said Chris Larkin, managing director of trading at E-Trade.

Shares of Nike edged lower in pre-market trading even after the sportswear company topped Wall Street’s earnings and sales expectations for the fiscal fourth-quarter despite a Covid lockdown in China and a tougher climate for consumers in the U.S.

Despite last week’s bounce, the S&P 500 is down nearly 14% in the second quarter, on track to post its worst quarter since the first quarter of 2020, at the depth of the pandemic.

“The bounce from the bear market lows is a welcome change, though slowing economic growth and lack of capitulation among investors has many skeptical of the durability of the recovery,” said Mark Hackett, Nationwide’s chief of investment research.