Stock Market Futures Fall After Rally; Dow, S&P 500, Nasdaq Lose Over 1% Each

The massive rally Wednesday that saw all three Wall Street indices rise by 4% seems to have spent itself with Thursday's futures heralding another correction that might mirror Tuesday's broad selloff.

Dow Jones futures fell for the second time this week, this time by 1.1% Thursday compared to fair value. S&P 500 futures lost 1.2% while NASDAQ 100 futures slid 1.25%. While futures can't accurately predict real world trading, they can, however, influence investor sentiment which remains touchy on account of the chaotic COVID-19 situation.

Analysts point out Dow Jones futures have been highly volatile during the full-blown COVID-19 stock market correction that began February 24 and led to the Dow's worst week since the Great Recession of 2008. This unnerving volatility extended into this week with a rally Monday, a correction Tuesday followed by a sharp rally Wednesday.

The market rally Wednesday is being credited to the "Biden Bounce," which refers to the unexpected massive win of former vice president and moderate Joe Biden in the Democratic Party's Super Tuesday nominating contests. Biden is a known quantity to Wall Street, his liberal but not anti-capitalist views contrasting sharply with democratic socialist candidate Sen. Bernie Sanders. The race for the Democrat's nomination is now between Biden and Sanders and Super Tuesday made Biden the favorite to win.

The comedown from this temporary high was quick in coming, however, as news of the coronavirus' rapid spread in the U.S. -- especially in New York state -- is refueling fears of another market selloff. New York reported 11 COVID-19 infections Wednesday. The state government said more than 1,000 people are now either under mandatory or self-imposed quarantine across Westchester County, the second most populous county in the state.

Analysts noted that despite Wednesday's rally, the market is still undergoing a painful correction. On Wednesday, the Dow Jones Industrial Average soared 1,173.45 points higher, or 4.5%, to 27,090.86. The benchmark S&P 500 rocketed upwards by 4.2% to 3,130.12, while the NASDAQ gained 3.8% to 9,018.09. The 30-stock Dow saw its second-highest point gain ever. It was the second time in three days the Dow swung 1,000 points or higher.

At the back of investors' minds will be the rout on Tuesday, which saw all three indices plunge almost 3% lower in a renewed massive rout, dismissing the 50 basis points rate cut made by the U.S. Federal Reserve within the day. The Dow shed 785.91 points at the closing bell for a 2.94% loss and sunk to 25,917.41. The S&P 500 lost 2.82% to lose 87.14 points and end up at 3,003.09 while the NASDAQ was down 268.08 or 2.99% at 8,684.09.

This rout was foretold by Tuesday's futures. An initial 400 point surge by the Dow early Tuesday quickly fizzled even after news of the Fed's first and largest emergency rate cut since the Great Recession of 2008. Fed chairman Jerome Powell, however, said the Fed isn't prepared to use any additional tools to stimulate the economy apart from the rate cuts.

Investors again fled to the safety of Treasurys and gold. The renewed flight to Treasurys pushed the benchmark 10-year yield below 1% for the first time ever. On the other hand, gold, surged 2.9% to land at $1,644.40 per ounce. Analysts at the time said the renewed selloff confirms investor fears the COVID-19 outbreak is raging out of control outside China and is spreading fast inside the United States.