Dow rumbles once again on Tuesday night amid a positive start of the week. US futures plunged sharply, pointing to another volatile session on Wall Street. As of 10:33 p.m. ET Tuesday, Dow Jones Industrial Average futures were down 454 points, indicating a loss of 596.16 points at the Wednesday open. S&P 500 and Nasdaq 100 futures also pointed to losses.
On Monday, US futures regained momentum as a big chunk of their losses were recovered. The Dow rallied more than 1,100 points while the S&P 500 had its best one-day performance since Dec. 26, 2018.
“Stocks posted impressive headline gains, but more strength needs to be seen beneath the surface to have confidence that the downside momentum in stocks has been broken,” Willie Delwiche, investment strategist at Baird, said in a note. “The weight of the evidence continues to argue for caution in the near term, and we recommend that investors remain patient in the face of ongoing market volatility.”
The rise in stocks can be associated partly with the move of the US government to introduce more fiscal stimulus to curb an economic slowdown from the spread of coronavirus. A White House official told reporters that President Donald Trump is proposing a 0% payroll tax rate for the rest of 2020. However, the timeline by which this proposed measure be implemented is still unclear.
“We need to see meaningful support for economic activity and credit backstops especially for small businesses, not a targeted approach executed only by the executive branch,” Joe Kalish, chief global macro strategist at Ned Davis Research, said in a note. “We will likely need congressional involvement. This is a potential solvency problem.”