Stock Futures Gain After Selloff Sends Indexes to 2022 Lows

U.S. stock futures rebounded Tuesday, putting major indexes on course to halt three days of punishing declines.

Futures tied to the S&P 500 rose 0.6%, a day after the broad index slumped 3.2% to its lowest level for the year. Technology-heavy Nasdaq-100 futures rose 1% while contracts tied to the Dow Jones Industrial Average rose 0.6%.

A cocktail of geopolitical risks and economic headwinds is posing the biggest threat to global growth in years and rattling markets. In the U.S., soaring inflation has prompted the Federal Reserve to begin raising interest rates and investors fear the move could tip the economy into recession. 

Global markets are looking equally troubled. In China, resurgent Covid-19 outbreaks and Beijing’s strict approach to fighting them threaten to revive the supply chain bottlenecks which first drove inflation higher. In Europe, the war in Ukraine threatens to keep energy prices elevated and is weighing on the region’s growth.

“By 2023 you are very likely to see growth slowing very significantly, and the specter of recessions is really starting to loom,” said

Seema Shah,

chief strategist at

Principal Global Investors.

“What we are seeing is the realization that it is going to be very tough for the Fed to get that soft landing just right. It is not impossible but it will be a very difficult balancing act.” 

While markets were rising Tuesday, the gains weren’t likely to change the downward trajectory of the market, Ms. Shah said. Investors were welcoming signs that the conflict in Ukraine wasn’t escalating and a planned EU embargo on Russian oil could face delays, she said.

In premarket trading,

Peloton Interactive

fell 17% after reporting declining sales and mounting losses as the stationary-bike maker struggles with the return to prepandemic consumer habits. 

Biohaven Pharmaceutical Holding Co.

surged more than 70% after

Pfizer

said it would buy the rest of the company for around $11.6 billion.

AMC Entertainment Holdings

rose 4.9% after reporting a strong jump in first-quarter sales.

The yield on the benchmark 10-year Treasury note edged down to 3.021% on Tuesday from 3.080% on Monday.

Brent crude oil fell 2% to $103.85 a barrel. Oil prices had been rising for the past few months, but concerns that China’s lockdowns will sap demand for commodities have taken some steam off the rally.

Demand for oil in China is likely to rebound sharply when restrictions start to ease, though the European Union’s proposed ban on imports of Russian oil remains an overhang, said Daniel Hynes, a senior commodity strategist at ANZ in Sydney.

“The fundamentals are still very tilted toward an extremely tight market with certainly risks skewed to further declines in supply over the next three to six months,” Mr. Hynes said. 

Bitcoin prices edged up after a steep selloff. The world’s largest cryptocurrency on Tuesday traded at $31,417.40, according to CoinDesk. That was up from 5 p.m. ET Monday, when it stood at $31,075.70.

Asian equity benchmarks were mixed Tuesday.



Photo:

Kin Cheung/Associated Press

Overseas, the pan-continental Stoxx Europe 600 rose 1%. In Asia, Japan’s Nikkei 225 closed 0.6% lower, the Shanghai Composite rose 1.1% and Hong Kong’s Hang Seng Index dropped 1.8%. 

Swedish Match jumped more than 24% after confirming that tobacco company Philip Morris International was in talks to buy it.

“I’d expect near-term market volatility to persist in Asia, as markets deal with lingering supply chain challenges, the likelihood of higher inflation and the prospect of more restrictive global central bank policies,” said Matt Doody, an emerging-markets research analyst on Janus Henderson Investors’ global research team.

Janus Henderson’s emerging-market fund has tilted its portfolio away from long-duration growth stocks due to the risks of higher rates, Mr. Doody said. Duration is a measure of how sensitive the prices of bonds or other financial investments are to changes in interest rates, given the timing of future expected cash flows. Fast-growing tech stocks that are valued largely based on far-off forecast profits are longer-duration assets than shares in mature businesses.

Write to Dave Sebastian at dave.sebastian@wsj.com and Will Horner at william.horner@wsj.com

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