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The S&P 500 and the Nasdaq logged their largest two-day gains since April 2020 in the previous session.
Both the indexes on Monday still recorded their worst monthly performance since the pandemic-led crash in March 2020, weighed down by expectations of faster-than-expected rate hikes and geopolitical tensions.
“A part of the rally is explained by dip-buying from those who believe stocks hit a bottom as a result of aggressive hawkish Fed pricing across the market,” Ipek Ozkardeskaya, senior analyst at Swissquote, said.
“Part of it is explained by some short covering, which got traders to buy back shares they initially bet against to close their positions.”
The U.S. Federal Reserve last month signaled it intends to combat inflation by hiking key interest rates, with Fed policymakers on Monday speaking of raising rates in March.
Traders are betting on five rate hikes this year, with some Wall Street analysts expecting seven hikes.
Geopolitical tensions added to market uncertainty, with Pentagon saying on Monday it was in active discussions with Eastern European allies about possible U.S. troop deployments to NATO’s eastern flank.
At 6:59 a.m. ET, Dow e-minis were down 42 points, or 0.12%, S&P 500 e-minis were down 10 points, or 0.22%, and Nasdaq 100 e-minis were down 28.25 points, or 0.19%.
Data from the Labor Department is likely to show job openings fell to 10.30 million in December, from 10.562 million in November, ahead of the monthly payrolls report on Friday.
Also in focus will be the ISM purchasing managers’ index (PMI) data, expected at 10:00 a.m ET, with analysts expecting it to come in at 57.5 in January, marking a 1.2 points deceleration from December.
IHS Markit is scheduled to release its final reading of U.S. manufacturing activity for January at 9:45 a.m. ET.
As of Monday, 172 S&P 500 companies posted fourth-quarter earnings, of which 78.5% reported above analyst expectations, according to Refinitiv.
United Parcel Service Inc (NYSE:UPS) rose 7.3% in premarket trading after targeting full-year revenue above market expectations.
Exxon Mobil Corp (NYSE:XOM) is scheduled to post results before markets open, while General Motors Co (NYSE:GM) and Google parent Alphabet Inc are expected to report earnings later in the day.
Megacaps Amazon (NASDAQ:AMZN) Inc and Meta Platforms Inc will report later this week.
Crypto-focused bank Silvergate Capital (NYSE:SI) Corp jumped 10.7% after saying it bought Meta Platforms-backed crypto venture Diem Association’s assets for $182 million.
