S&P Futures Tumble As Epic One-Day Rally Fizzles

On any other day, a 1.5% drop in the S&P futures would be cause for alarm; however after yesterday's historic 5% surge in US stocks it merely prompts a shrug, because even with ES sliding -36 points, it is roughly where it was trading at 3:35pm yesterday.

Whether because we went from a near record oversold market to overbought in one day, or just because traders concluded that yesterday's surge was nothing more than a bear market rally, the kind of which we saw on so many occasions during the depths of the financial crisis...

 

... nearly a third of yesterday's rally fizzling, wiped out in overnight trading, with S&P futures sliding for the past 6 hours and after an early spike which pushed the Emini briefly above 2480, the contract has since dropped as much as 60 points and is prompting renewed concerns about the sustainability of yesterday's bullish reversal.

 

That said, even with the previous session’s surge, it’s still a horrible month for American stocks, with the S&P 500 down almost 11%.

Meanwhile, even as futures dropped, world stocks bounced off a near two-year low on Thursday, lagging Wall Street's dramatic surge, though the first fall in Chinese industrial profits in three years and renewed Italian banking worries offered a sobering reminder of the problems weighing on the world economy.

 

“The relentless selling which prevailed leading up to Christmas has mercifully halted as U.S. stock markets recorded significant gains,” said Stephen Innes, trader at OANDA. According to Innes, the rally was partly due to a Mastercard Inc report that sales during the U.S. holiday shopping season rose the most in six years in 2018, helping allay concerns about the health of the U.S. economy. "The surge in online purchases over the holiday season should be a reminder for the markets never to underestimate the purchasing power of the U.S. consumer."

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