By Barbara Kollmeyer, MarketWatch
Apprehension builds ahead of Wednesday's CPI data
A two-day recovery for U.S. equities showed signs of faltering on Tuesday, with Dow Jones Industrial Average futures dropping more than 100 points.
Futures fell ahead of Wednesday's all-important inflation data, which could reignite the anxiety that helped drive stocks to dramatic losses last week.
What are main benchmarks doing?
Dow futures slid 136 points, or 0.6%, to 24,448, while S&P 500 futures dropped 12.20 points, or 0.5%, to 2,643. Nasdaq-100 futures fell 31.50 points, or 0.5%, to 6,500.75.
On Monday, the Dow Jones Industrial Average rallied 410.37 points (http://www.marketwatch.com/story/dow-futures-rally-more-than-250-points-as-focus-turns-to-trumps-infrastructure-plan-2018-02-12), or 1.7%, to 24,601.27, with 28 of the 30 components trading higher. The S&P 500 index advanced 1.4%, to 2,656, while the Nasdaq Composite Index climbed 1.6%, to 6,981.96.
That marked the second-straight winning session for U.S. stocks, as investors went hunting for bargains after last week saw the biggest weekly losses for all three indexes since 2016.
Need to know: 'Risks of a recession' are rising, says Ray Dalio (http://www.marketwatch.com/story/risks-of-a-recession-are-rising-says-ray-dalio-2018-02-13)
What's driving the markets?
A two-day gain for Wall Street has seen the Dow industrials climb 1.7% and the S&P 500 1.4%. However, the Dow, for example, is still 7.6% off its Jan. 26 high of 26,616.71, and investors remain on edge as doubts fester that last week's pullback has fully run its course.
Opinion:Blame machines for the stock market's wild swings, but the response is all on you (http://www.marketwatch.com/story/blame-the-machines-for-stock-market-selloff-but-the-response-is-all-on-you-2018-02-12)
In addition, there was hesitation overseas, with European stocks failing to follow Wall Street's lead and Asia giving up some gains by the close.
The next big clue for market direction could come from Wednesday's January consumer price inflation data. There are concerns that if CPI comes in higher than expected, it could spark another selloff, as worries about higher prices and its effect on the Federal Reserve's interest-rate hiking plans triggered last week's dramatic volatility and declines.
See:Why Valentine's Day may represent the next big test for the stock market (http://www.marketwatch.com/story/weeks-inflation-data-is-seen-as-the-markets-next-big-tests-2018-02-12)
Economists polled by MarketWatch (http://www.marketwatch.com/story/inflation-fears-haunt-wall-street-again-but-investors-might-just-be-having-a-bad-dream-2018-02-10)are expecting at 0.4% rise for headline inflation, and a 0.2% gain for core inflation, which strips out food and energy costs.
Investors have also been considering a $4.4 trillion Federal budget that U.S. President Donald Trump has proposed, which would see the deficit nearly double in 2017 and rise some $7 trillion over the next decade. Of course, few expect the budget in its current form will be enacted by Congress, especially given it pushes for deep cuts in social programs. But the tax cuts signed into law in December and the spending deal reached last week are already seen ballooning the deficit.
Read: Here's the nagging question at the heart of the stock-market selloff (http://www.marketwatch.com/story/heres-the-nagging-question-at-the-heart-of-the-stock-market-selloff-2018-02-12)
What are strategists saying?
"A lack of volume yesterday on Wall Street suggests there is not a huge amount of interest in this recovery just yet and may be a signal that this isn't a reversal in a secondary downtrend," said Neil Wilson, senior market analyst at ETX Capital, in a note to clients.
He noted that U.S. stock market volumes last week were the highest since August 2011 (http://www.marketwatch.com/story/weekly-us-stock-market-volume-highest-since-august-2011-2018-02-09), while Friday's rally also saw volumes surge, but that was less the case on Monday. "Lack of volume yesterday suggests we are yet to build consensus around this rally and it could run into trouble if conviction is lacking," Wilson said.
It's too soon to say the correction is over, said Konstantinos Anthis, on the research team at ADS Securities. "From both a fundamental and a technical standpoint we need more evidence: yields need to return below 2.5% and markets should look to break above their recent highs which would suggest a reversal attempt," he said, in a note to clients.
Read:5 great questions Americans are asking about the market's crazy ride (http://www.marketwatch.com/story/reddit-users-have-questions-about-the-stock-market-and-we-have-the-answers-2018-02-07)
(http://www.marketwatch.com/story/reddit-users-have-questions-about-the-stock-market-and-we-have-the-answers-2018-02-07)"Inflation fears haven't gone away so there are nerves heading into Wednesday's U.S. inflation data release," said Jasper Lawler, head of research at London Capital Group, in emailed comments. "We expect markets to stay in a volatile range for the time being. Investors need to be prepared for multiple-hundred point swings up and down in the Dow until markets establish a direction."
Which stocks are active?
AmerisourceBergen Corp.(ABC) shares jumped 13% in premarket action after Walgreens Boots Alliance Inc.(WBA) reportedly made a takeover approach for the drug distributor, (http://www.marketwatch.com/story/walgreens-makes-takeover-bid-for-drug-distributor-amerisourcebergen-2018-02-12) according to sources cited by The Wall Street Journal.
Under Armour Inc.(UAA) shares rose 9% in premarket after the sports gear maker posted stronger-than-expected revenue (http://www.marketwatch.com/story/under-armour-shares-surge-85-after-revenue-beat-2018-02-13). Blue Apron Holdings Inc. (APRN) jumped 7.5% after losses that were smaller than expected and revenue beat forecasts (http://www.marketwatch.com/story/blue-apron-shares-spike-after-revenue-beats-expectations-2018-02-13).
PepsiCo Inc.(PEP) earnings are still ahead. MetLife Inc.(MET) and Baidu Inc.(BIDU) are due after the close.
Cisco earnings:High hopes pinned to return to revenue growth (http://www.marketwatch.com/story/cisco-earnings-high-hopes-pinned-to-return-to-revenue-growth-2018-02-12)
Amazon.com Inc.(AMZN) could be in focus after a report that the e-commerce retailer will lay off hundreds of workers. (http://www.marketwatch.com/story/amazon-laying-off-hundreds-amid-hiring-spurt-2018-02-12)
(http://www.marketwatch.com/story/amazon-laying-off-hundreds-amid-hiring-spurt-2018-02-12)General Motors Co.(GM) shares could be in the spotlight after the auto maker said it would close an auto plant in South Korea (http://www.marketwatch.com/story/gm-to-close-auto-plant-in-south-korea-2018-02-12), affecting 2,000 workers and leading to a charge of $850 million.
What's on the economic docket?
Cleveland Fed President Loretta Mester is expected to give a speech on monetary policy and the economic outlook to the Dayton Area Chamber of Commerce in Dayton, Ohio at 8 a.m. Eastern Time.
As for data, the National Federation for Independent Businesses will release its index of small- business optimism for January at 6 a.m. Eastern. Household debt for the fourth-quarter is due at 11 a.m. Eastern.
What are other assets doing?
Europe stocks (http://www.marketwatch.com/story/european-stocks-head-lower-after-wall-street-fails-to-rebound-2018-02-08)traded lower (http://www.marketwatch.com/story/european-stocks-run-into-the-red-as-wall-street-sets-course-for-pullback-2018-02-13), while in Asia, Japan's Nikkei 225 dropped 0.6%, bucking a mostly stronger session for other indexes (https://www.npr.org/2018/02/12/584531641/when-did-marriage-become-so-hard).
The dollar was under pressure (http://www.marketwatch.com/story/dollar-slides-vs-yen-as-investors-weigh-up-recent-stock-gains-2018-02-13), chiefly against the Japanese yen , dropping 1% to 107.44. The ICE U.S. Dollar Index fell 0.54% to 89.722. Gold futures rose 0.4% as the dollar weakened (http://www.marketwatch.com/story/gold-looks-to-extend-recovery-as-stocks-dollar-retreat-2018-02-13).
The yield on 10-year Treasury notes slipped to 2.831% from 2.857% seen late Monday.
Read:This chart warns that the 30-year downtrend in interest rates may be over (http://www.marketwatch.com/story/is-the-decades-long-downtrend-in-interest-rates-finally-over-2018-02-08)
Crude-oil moved lower. The International Energy Agency said booming U.S. shale supply will likely overwhelm oil demand and weigh on prices this year (http://www.marketwatch.com/story/booming-us-shale-supply-will-overwhelm-oil-demand-says-iea-2018-02-13). Bitcoin slipped around 4% to $8,544.
Sign up here (http://www.marketwatch.com/user/newsletter)to get our Need to Know column delivered to your email box.
(END) Dow Jones Newswires
February 13, 2018 07:59 ET (12:59 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.