By Mark DeCambre, Chris Matthews, and Aaron Hankin
The S&P 500 and Nasdaq closed at their lowest levels since the fall of 2017 on Monday
Is the market fearless?
U.S. stock index futures pointed to a higher open Tuesday, after a multisession rout took the Nasdaq and the S&P 500 to their lowest levels since the autumn of 2017.
How are benchmarks performing?
Futures for the Dow Jones Industrial Average YMZ8, +0.95% gained 153 points, or 0.6%, at 23,824, S&P 500 futures ESZ8, +0.78% were 17.25 points, or 0.7%, higher at 2,569, while those for the Nasdaq-100 NQZ8, +0.84% were climbing 52 points to 6,517, an ascent of 0.8%.
On Monday, the Dow DJIA, +1.29% retreated 507.53 points, or 2.1%, at 23,592.98, the S&P 500 SPX, +1.03% fell 54.01 points, or 2.1%, at 2,545.94, and the Nasdaq Composite Index COMP, +1.14% retreated 156.93 points to 6,753.73, a drop of 2.3%.
The S&P 500 closed at its lowest level since October of 2017, the Nasdaq finished at its lowest since November of 2017, while the Dow closed at lowest level since March 23, according to Dow Jones Market Data.
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What’s driving the market?
Persistent fears that sluggish global growth will wash up on U.S. shores continues to unsettle investors and has thus far resulted in the worst equity market selloff in recent memory, primarily underpinned by rising interest rates and trade-war jitters.
That downdraft comes as the Federal Open Market Committee is set to commence its final rate-setting gathering of 2018 Tuesday, with the market fixated on the pace of rate hikes next year, even as they brace for an increase to benchmark borrowing costs of about a quarter of a percentage point at the conclusion of the Federal Reserve’s rate-setting meeting on Wednesday.
CME Group data, gauging federal-funds futures, indicate a 71.5% likelihood for an increase to fed-fund rates to a range of 2.25% to 2.50%.
Meanwhile, Chinese leader Xi Jinping, speaking at an event to commemorate the 40th anniversary of China‘s economic reforms, called for China to “stay the course” on economic reforms, adding a defiant note that “no one is in a position to dictate to the Chinese people what should or should not be done,” an apparent reference to the ongoing tariff spat between Beijing and Washington, led by President Donald Trump’s administration.
What are analysts saying?
“We see a pretty low volume session ahead of us,” wrote Joel Kulina, analyst with Wedbush Securities in a note to clients, arguing that investors will be reluctant to make major bets before knowing the what the Fed’s next move will be.
Markets Tuesday are “set up for an oversold near-term bounce, and nothing more than that,” he wrote. “Those waiting for a meaningful Santa Claus Rally will be disappointed, as hope isn’t a strategy that’s been working in ‘18.”
“Perhaps USD-traders have chosen to lock some profits ahead of tomorrow’s FOMC rate decision. The market assigns a nearly 70% chance for the Committee to push the hiking button and thus, if this is the case, market attention will quickly turn to the updated economic projections, and especially the new ‘dot plot’,” wrote Charalambos Pissouros, senior market analyst at JFD Brokers, in a Tuesday research note.
“Investors will be eager to see whether growth concerns will prompt Fed officials to revise down their projections, and if so, by how much,” he wrote.
What data are ahead?
U.S. home builders began construction at a seasonally-adjusted annual rate of 1.26 million homes in November, above the 1.23 million expected, according to a MarketWatch poll of economists.
New building permits in November were issued at a seasonally adjusted annual rate of 1.33 million, versus consensus estimates of 1.27 million, according to FactSet.
Which stocks are in focus?
Oracle Corp. ORCL, +3.54% is up 5.3% in premarket after the software company reported an earnings beat late Monday.
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Shares of CBS Corp. CBS, +0.38% are up 1.7% in light premarket trading, after the broadcaster announced Monday that former CEO Les Moonves won’t receive a $120 million severance package after the board of directors concluded he violated company policy and was uncooperative with an investigation into sexual misconduct allegations.
Boeing Co. BA, +4.40% stock is up 2.6% in premarket trade, after the company announced a 20% dividend increase and a new share buyback program Monday evening.
How are other markets trading?
Asian markets closed lower Tuesday, with Japan’s Nikkei NIK, -1.82% , Hong Kong’s Hang Seng index HSI, -1.05% and China’s Shanghai Composite Index SHCOMP, -0.82% losing ground.
In Europe, stocks are also down, with the Stoxx Europe 600 SXXP, -0.41% in the red.
Crude oil CLF9, -2.45% is continuing to slide Tuesday, down 2.9% during a week when prices have fallen more than 5.3%. The price of gold GCG9, -0.10% is virtually unchanged, while the U.S. dollar DXY, -0.14% is down 0.4%