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May 17, 2022

Dow futures rally 400 points, Home Depot jumps on earnings

PUBLISHED MON, MAY 16 20226:06 PM EDTUPDATED 1 MIN AGO

U.S. stock futures were sharply higher on Tuesday morning as the market tried to bounce after a punishing bear market for the tech-heavy Nasdaq and a 19% pullback for the S&P 500.

Futures contracts tied to the Dow Jones Industrial Average jumped 400 points, or 1.4%. S&P 500 futures gained 1.7%, while Nasdaq 100 futures added 2.1%.

Those moves come as several names rose in Tuesday premarket trading. Citigroup shares jumped 5% in premarket trading after a filing revealed Monday evening that Warren Buffett’s Berkshire Hathaway added a nearly $3 billon stake in the struggling bank in the first quarter.

Citi shares have underperformed the rest of the financial sector in the past 12 months, down nearly 40% while the Financial Select Sector SPDR Fund is off by 12% over the same period.

Travel stocks popped in the premarket after United Airlines raised its revenue outlook for the second quarter on improved consumer demand. United Airlines’ stock price rose 4%, Delta’s jumped 3% and American Airlines’ jumped 3%.

Home Depot shares rose more than 3% in the premarket after the home improvement retailer posted better-than-expected quarterly results. The company also raised its full-year outlook.

Semiconductor stocks climbed higher in premarket trading. Shares of Advanced Micro Devices jumped more than 3% following an upgrade from Piper Sandler, which said the stock looked attractive after falling 34.5% this year. Nvidia’s stock price rose 3%, Qualcomm’s jumped 2.4% and Micron Technology’s rose 2%.

Meanwhile, Walmart shares dropped more than 5% in the premarket after the retail giant reported an earnings miss because of inflation pressure. The company raised its sales outlook, but lowered its profit forecast.

Tuesday’s gains come after a strong overnight session in Asia, as traders cheered encouraging Covid news out of China. Tuesday marked the third straight day that Shanghai — a key economic hub in the country that has been hit with a strict Covid lockdown — did not record a virus infection outside of the city’s quarantine zones.

“On top of this, investors were encouraged by three consecutive days of relatively normal and boring price action in US stocks, a sharp contrast to the last few weeks,” wrote Adam Crisafulli of Vital Knowledge.

Tuesday’s bounce marks the market’s latest attempt at a recovery following weeks of steep losses. The S&P 500 is coming off a six-week losing streak — its longest since 2011. The Dow, meanwhile, has fallen for seven straight weeks, marking its longest weekly slide since 2001. Year to date, the S&P 500 and Dow are down 15.9% and 11.3%, respectively.

Investors were also watching out for retail sales numbers hitting at 8:30 a.m. ET. Those figures will give a clue as to how well the consumer is faring with surging U.S. inflation that has prompted the Federal Reserve to tighten monetary policy.

Inflation concerns have been a mounting headwind for stocks, with some investors worried the economy could ultimately tip into a recession.

“We see clear late-cycle indicators, and while the risk of economic growth contraction or recession has risen steadily through the first four-and-a-half months of this year, we are now beginning to cross over a probability level that makes recession a base case for the end of this year and beginning of next,” Darrell Cronk, president of Wells Fargo Investment Institute wrote in a note Monday.

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