A chart of the S&P 500 Index, upper right, is displayed on a computer sceen on the floor of the New York Stock Exchange (Photographer: Daniel Acker/Bloomberg)

U.S. Futures Drop After S&P 500’s Biggest Rally Since 2009

(Bloomberg) -- U.S. stock-index futures dropped on Thursday, retracing about a third of yesterday’s rally -- the biggest since 2009.

S&P 500 Index futures contracts expiring in March fell 1.9 percent and traded around 1.5 percent lower as of 10:20 a.m. in London. The retreat came after the underlying gauge rallied 5 percent Wednesday. Dow Jones Industrial Average contracts were also down 1.5 percent while those on the Nasdaq 100 were down 1.8 percent.

In Europe, markets returned from their two-day Christmas break to reverse early gains. The Stoxx Europe 600 Index fell 0.6 percent with nearly all the sub-groups in the red, led by drops in utilities and real estate shares. With only three trading days left, equities in the region are heading for the worst year since the 2008 financial crisis.

U.S. Futures Drop After S&P 500’s Biggest Rally Since 2009

Equity bulls flooded the stock market stateside on a flurry of developments on Wednesday:

  • A senior White House official assured investors that the Federal Reserve chairman won’t get fired, an action Bloomberg News reported over the weekend that President Donald Trump had discussed.
  • Trump made unusually direct comments on the stock market Tuesday, saying shares were presenting “a tremendous opportunity to buy.”
  • Energy producers added a fillip to U.S. stocks as oil rose above $46 a barrel in its strongest rally since 2016.
  • A report late in the session that a U.S. delegation will visit Beijing in early January for trade talks gave stocks a final push.

Wednesday’s rally is unlikely to be sustained as the “fundamentals haven’t shifted,” said Kyle Rodda, a Melbourne-based market analyst at IG Group Holdings Plc. “Markets are still nervous about how financial markets and the global economy will go during a cyclical slowdown without central bank support,” he said by phone.

U.S. Futures Drop After S&P 500’s Biggest Rally Since 2009

History shows that not every miracle resurrection in equities is a dead-cat bounce, though it is true that strong rallies are common in prolonged market slumps. In eight previous bear markets, the S&P 500 has experienced rallies of greater than 2.5 percent more than 120 times as the benchmark plunged from peak to trough, according to data compiled by Bloomberg.

A U.S. government shutdown and trade tensions between the world’s two largest economies are among reasons for investor caution.

“You’re going to get this push and pull in markets where there’ll be big up days and big down days because no one really can get a good grasp on where things ought to be at this point in time,” Rodda said.

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