U.S. stocks rallied in premarket trading after a three-day selloff that wiped out more than $5 trillion of value in U.S. equities.
S&P 500 futures gained 2.7% as of 8:10 a.m. Tuesday in New York, while contracts on the Nasdaq 100 advanced 2.6%. Both underlying gauges swung wildly early Monday before ending the day relatively little changed. Nvidia Corp. is up 4.30%, leading the Magnificent Seven stocks higher.
Japan is expected to get priority in U.S. tariff talks, ahead of other countries seeking to roll back President Donald Trump’s reciprocal duties. Treasury Secretary Scott Bessent said up to 70 counties asked to negotiate tariffs and solid proposals may lead to good deals.
“While most market commentary I read suggests it’s too early to buy from a flows, positioning and valuation perspective, I think it’s time to at least take off some hedges and monitor reaction functions as opposed to pressing downside after the near 10% drop in the S&P last week.,” John Tully, Bank of America Corp.’s global macro sales, wrote in a note to clients.
Meanwhile, to SpotGamma’s founder Brent Kochuba, Tuesday’s rally can be explained by low liquidity, which amplifies market moves. “Liquidity is terrible so anyone with just a decent-sized order is going to move the market,” he said.
A model from UBS Group AG’s trading desk shows that Monday morning had a high chance to be the bottom of the selloff.
“Since 1990, after a weekly selloff of over 10% that ended on Friday, S&P 500 rose 80% of time in 1 day and 1 week +5.8% and +4.7% on average,” Rebecca Cheong, UBS Securities’ head of Americas equity derivatives wrote in a note to clients.
The CBOE Volatility Index, or the VIX, is hovering near 42 after closing at 47 on Monday, a reading in the 87th percentile compared to past recessions, according to JPMorgan Chase & Co. global equity derivatives strategy team.
“That indicates that the VIX could react more violently if markets fail to stabilize, particularly on an intraday basis,” JPMorgan’s Tony Lee wrote, adding that his team screens for equities with fundamental support that have significantly pulled back, positioning them for potential relief rallies. “Top-ranked names include Nvidia, Meta Platforms Inc., Broadcom Inc., Eli Lilly and Co. and Morgan Stanley.”
The next big test for stocks arrives this Friday as earnings season kicks off, starting with results from big U.S. banks including JPMorgan and Wells Fargo & Co.
For the first quarter, analysts now see year-over-year earnings growth of 6.7% for the S&P 500, down from about 11.1% in early November when Trump was elected, according to data compiled by Bloomberg Intelligence. For all of 2025, they see profits rising 9.4%, compared with a forecast of 12.5% at the beginning of the year.
Delta Air Lines Inc., CarMax Inc. and Constellation Brands Inc. also report earnings this week, and are expected to discuss the wide-ranging impact of tariffs on their customers and supply chains at earnings calls.
