Wall St Set To Extend Bounce As Inflation Fears Ease

Wall Street's main indexes were set to open higher on Monday and extend gains from the previous week after a slide in commodity prices allayed concerns about an overly aggressive Federal Reserve that is seeking to tame inflation.

All three key indexes posted solid gains last week, with the tech-heavy Nasdaq Composite rising 7.5% as investors bet the retreat in oil prices from the three-month highs hit in June could ease inflationary pressures and push the Federal Reserve to moderate its aggressive policy tightening.

"I think there is an overwhelming feeling that inflation may be coming down and the Fed may not have to be as aggressive as anticipated moving forward," said Thomas Hayes, managing member at Great Hill Capital LLC in New York.

"As early as a week ago, unequivocally, everyone did feel that 75 basis points was guaranteed. I think now those probabilities have come down a little bit and it's kind of an open story."

The U.S. central bank has rapidly raised interest rates to rein in 40-year-high inflation, stoking fears its actions could tip the world's largest economy into a recession.

After the benchmark S&P 500 index earlier this month recorded a 20% drop from its January closing peak to confirm a bear market, investors have been trying to gauge when the market might hit its bottom.

"The rebound in markets is a reminder of the merits of staying invested in line with a long-term plan. But volatility is likely to remain elevated until we see strong evidence that inflation is moderating, recession risks are receding, and geopolitical threats are declining," Mark Haefele, chief investment officer at UBS Global Wealth Management wrote in a client note.

Haefele added that the main driver of the markets in the second half of 2022 will be investor perceptions of whether we are headed for stagflation, reflation, a soft-landing, or a slump.

Shares across the board gained in premarket trading on Monday, with tech-focused growth stocks including Tesla Inc, Netflix Inc, Alphabet Inc and Apple Inc up between 0.5% and 1.5%.

At 08:25 a.m. ET, Dow e-minis were up 79 points, or 0.25%, S&P 500 e-minis were up 14.5 points, or 0.37%, and Nasdaq 100 e-minis were up 58.25 points, or 0.48%.

Shares of Robinhood Markets rose 2.4% after media reports said Goldman Sachs upgraded the retail broker's stock to "neutral" from "sell".

Goldman Sachs, however, cut rating on Coinbase Global Inc to "sell" from "buy", according to media reports, sending shares of the cryptocurrency exchange lower by 5.7%.