U.S. stock index futures pointed sharply higher early Monday, suggesting a potential recovery at the opening bell after the steep declines recorded on Friday.
Investors may seize the opportunity to buy shares at cheaper levels following the previous session’s sharp sell-off. On Friday, the major indexes sank to their lowest point in a month amid escalating fears of a U.S.-China trade war, after President Donald Trump threatened a “massive increase” in tariffs on Chinese imports in response to Beijing’s expanded rare earth export controls.
Those fears eased somewhat on Sunday when Trump took to Truth Social with a more conciliatory tone.
“Don’t worry about China, it will all be fine!” Trump said. “Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!”
Despite the upbeat futures, overall trading volume could be thinner than usual, with the Columbus Day holiday likely keeping some market participants sidelined.
The lack of major U.S. economic releases may also limit activity this week. The ongoing government shutdown has forced most key data releases to be postponed, with the Bureau of Labor Statistics announcing that its consumer price index report, initially scheduled for Wednesday, will be released on Friday, October 24. The BLS noted that the CPI data will allow Social Security Administration to meet its statutory obligations to ensure timely benefit payments.
With little economic data on the calendar, earnings season could take center stage. Several major banks — Citigroup (NYSE:C), JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) — are scheduled to report results later this week.
Friday’s trading session saw stocks tumble throughout the day, with all three major indexes ending near their session lows. The Nasdaq Composite plunged 820.20 points, or 3.7%, to 22,204.43. The S&P 500 dropped 182.60 points, or 2.7%, to 6,552.51, while the Dow Jones Industrial Average sank 878.82 points, or 1.9%, to 45,479.60.
For the week, the Dow lost 2.7%, while the S&P 500 and Nasdaq fell 2.4% and 2.5%, respectively.
The sell-off followed another Trump post accusing China of “becoming very hostile” and threatening a “massive increase” in tariffs. He also announced he would not meet with Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation forum in South Korea, stating “now there seems to be no reason to do so.” These remarks fueled concerns over further escalation of the trade dispute and its potential impact on the global economy.
Many traders used the weakness as a chance to lock in profits after the market’s recent rally, amid heightened valuation concerns.
Meanwhile, a report from University of Michigan showed its consumer sentiment index dipped slightly to 55.0 in October from 55.1 in September, just above expectations of 54.2. Year-ahead inflation expectations eased to 4.6% from 4.7%, while long-run expectations held steady at 3.7%.
Trump’s remarks triggered sharp declines in semiconductor and computer hardware names, with the Philadelphia Semiconductor Index and NYSE Arca Computer Hardware Index sliding 6.3% and 5.8%, respectively.
Oil services stocks also fell in tandem with crude prices, pushing the Philadelphia Oil Service Index down 5.4% to its lowest close in nearly two months. Losses were also seen across steel, networking, banking, and transportation shares as widespread weakness swept through Wall Street.
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