American stock index futures showed signs of a bounce Tuesday morning after their sharpest single-day drop of the year.
Dow, S&P 500 and Nasdaq futures all saw losses exceeding 3% yesterday. Most notably, Micro E-mini Nasdaq futures closed more than 4% down at 7385.25.
In retaliation to President Donald Trump threatening a new series of tariffs on Chinese imports, the People’s Bank of China devalued the yuan currency to historically low levels. This caused a chain reaction in both currency and equity markets and spurred a massive selloff on Wall Street.
Market volatility saw a considerable spike as well. The CBOE VIX volatility index more than doubled during yesterday’s session and broke out to yearly highs. By the end of the session, however, it settled at a 31% increase.
Although the trade dispute between the U.S. and China is far from over, futures markets look poised for a bounce today.
- Micro E-mini S&P futures (MES) are currently up 0.86%
- Micro E-mini Nasdaq futures (MNQ) are up 1.3%
- Micro E-mini Dow futures (MYM) are up 184 points, or 0.72%
Above is a daily Micro E-mini Nasdaq (MNQ) from June 2019 forward. Yesterday Micro E-mini Nasdaq futures revisited levels not seen since the beginning of June. The VIX index is plotted in the lower chart panel to show relative volatility.
The unrelenting trade dispute between the U.S. and China will likely bring additional volatility and trade opportunities for forex and equity markets. Traders should always practice risk mitigation measures and protect their capital in case of unexpected market swings.