NEW YORK, Sept 21 — US stock indexes were set for a strong open today as investors tried to shake off fears of contagion from a potential collapse of China’s Evergrande, with focus also turning to a Federal Reserve meeting for more cues on monetary policy.
All three indexes marked steep losses yesterday as investors fretted over a possible default by China’s no.2 property developer Evergrande, which could ripple across the broader economy and possibly spill over to foreign markets.
Concerns over Evergrande acted as a boiling point for markets already grappling with coronavirus concerns and sluggish economic growth.
Investors tend to be jittery with stocks trading at relatively lofty valuations. The S&P 500 has now fallen for nine out of the 11 sessions since it hit a record high at the beginning of September.
“As the market has marched higher, there’s always a concern over ‘when is the music going to stop?’ ... there are more than several issues that created a confluence, that may have been the match that lit the fuse (on Monday),” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
Attention tomorrow will be on the results of the Fed’s policy meeting, where the central bank is expected to lay the groundwork to ease its stimulus, although the consensus is for an actual announcement to be delayed until the November or December meetings.
Taper fears have already roiled markets so far in September, and along with seasonally weak trends, have set the S&P 500 on course to snap a seven-month winning streak.
“It comes down to how (tapering) is presented ... ultimately we’re going to get some measures in place to temper inflation concerns. The market is already nervous, and if they say they’re going to taper, it’s going to create some near-term angst,” Bakhos added.
At 8:29 a.m. ET, S&P 500 e-minis were up 26.5 points, or 0.61 per cent, and Nasdaq 100 e-minis were up 93 points, or 0.62 per cent.
The S&P 500 index dropped substantially below its 50-day moving average yesterday, its first major breach in more than six months. The average has served as a floor of sorts for the index this year.
Analysts say the index’s 200-day moving average is now in sight.
Among other movers, Freeport-McMoRan Inc led mining stocks higher with a 1.6 per cent jump, following steep losses in commodity-linked stocks a day earlier as copper prices hit a one-month low.
Interest rate-sensitive banking stocks also bounced, tracking a rise in Treasury yields.
Heavyweight technology stocks, including Apple Inc, Tesla Inc, Facebook Inc and Alphabet Inc , rose between 0.8 per cent and 1.0 per cent.
The CBOE volatility index, known as Wall Street’s fear gauge, fell from a four-month high hit yesterday. — Reuters
