U.S. stock futures advance as Wall Street returns from Labor Day break

U.S. stock futures were firmer on Tuesday but hovering only just above six-week lows as worries about high energy prices, stubborn inflation and tightening monetary policy continued to contain bullish sentiment.

How are stock-index futures trading
  • S&P 500 futures ES00, +0.62% rose 21 points, or 0.5%, to 3945
  • Dow Jones Industrial Average futures YM00, +0.59% gained 157 points, or 0.5%, to 31469
  • Nasdaq 100 futures NQ00, +0.70% added 77 points, or 0.6%, to 12181

On Friday, the Dow Jones Industrial Average DJIA, -1.07% fell 338 points, or 1.07%, to 31318, the S&P 500 SPX, -1.07% declined 43 points, or 1.07%, to 3924, and the Nasdaq Composite COMP, -1.31% dropped 154 points, or 1.31%, to 11631. The S&P 500 is up 7% from its mid-June low but remains down 17.7% for the year to date.

What’s driving markets

The post-summer market began on Tuesday — following the Labor Day break — with Wall Street set to display a more positive mood than of late.

But lingering concerns about the economic fallout from a European energy crisis and the Federal Reserve’s determination to damp multi-decade high inflation were constraining gains.

U.S. equities had initially bounced on Friday after the August nonfarm payrolls report was deemed not so strong that it would encourage the Fed to become even more aggressive in hiking interest rates.

But news later in the day that Russia would indefinitely shutdown the main gas pipeline to Europe, thereby adding to the chances of a sharp economic slowdown on the continent, pushed the S&P 500 back towards its lowest level since late July.

“Stocks ended a difficult week with a volatile pre-Labor Day session, buoyed by better than expected jobs numbers by almost every metric, especially a rise in the participation rate,” said Evercore ISI in a note.

“Offsetting the welcome econ report was the news that the Nord Stream pipeline would not restart as planned, reminding the world that Russia’s leverage over Europe remains unprecedented, unrelenting, and an uncompromising threat to the Post WWII global order,” Evercore added.

U.S. equity futures were aided on Tuesday by gains across European bourses as the new U.K. Prime Minister Liz Truss was rumoured to be considering freezing household energy bills, the latest in a number of moves by European politicians looking to shield electorates from the cost-of-living crisis.

A pullback in the dollar index DXY, +0.08% from 20-year highs as the euro EURUSD, +0.08% and pound GBPUSD, +0.70% bounced off recent lows also was helping sentiment early on Tuesday. A strong dollar is seen hampering profits of those U.S. companies with overseas sales.

But this was countered by rises in long term borrowing costs as the U.S. 10-year Treasury yield TMUBMUSD10Y, 3.250% rose to the highest level in more than six weeks as the market caught up with the latest gains for energy prices.

WTI crude CL.1, -0.09% was trading around $89.50 after the OPEC+ oil cartel said it would trim production by 100,000 barrel a day to support prices. The European natural gas benchmark, the ICE Dutch TTF future, was down on Tuesday but several percentage points higher than the Friday close.

U.S. economic updates set for release on Tuesday include the August S&P services PMI survey at 9:45 a.m. Eastern and the August ISM services index at 10 a.m. Eastern.