US stock futures waver after turbulent session

Fed Chairman Powell plans to suggest Congress would need to spend more to shore up struggling parts of the economy

U.S. stock futures wobbled Tuesday, signaling that stocks may steady after a bout of volatility that has eroded investors’ confidence in the market’s monthslong rebound.

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Futures tied to the S&P 500 edged up less than 0.2% while contracts for the technology-heavy Nasdaq Composite gained 0.7%. The market retreated sharply Monday, pushing the S&P 500 to a fourth-straight day of losses, the longest losing streak for the broad gauge since late February.

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Stocks have gyrated in recent trading sessions, after marching higher for much of the summer. The turbulence entered a new phase Monday, when shares in sectors that are highly sensitive to economic growth, such as banks, materials and industrials, endured the biggest declines. Technology stocks, whose swings had weighed on markets in recent weeks, advanced.

Investors say they are contending with a clutch of risks, including the dwindling chances that lawmakers agree on a second round of economic relief before the November election. Money managers are also increasingly concerned about the possibility of a protracted period of uncertainty following the election.

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Surging cases in Europe have knocked confidence in the world economy’s recovery from the downturn sparked by coronavirus. Reported new cases increased sharply in the U.S. Monday, to 52,000. That was the highest single-day increase since Aug. 14, according to Johns Hopkins University.

“The volatility will continue for a little while longer,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley. Ultimately, the turbulence is likely to be a blip in a long-running bull market, he said. But for now, “investors should keep their powder dry” and not seek to buy stocks at discounted prices, Mr. Sheets added.

In prepared remarks published Monday ahead of Federal Reserve Chairman Jerome Powell’s scheduled testimony on Capitol Hill, the policy maker suggested Congress would need to spend more to shore up struggling parts of the economy. “The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government,” Mr. Powell said.

Mr. Powell is due to testify to the House Financial Services Committee alongside Treasury Secretary Steven Mnuchin, starting at 10:30 a.m. ET.

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Investors are also worried that the rebound in consumer spending will go into reverse without a new deal among U.S. lawmakers to provide additional unemployment benefits. Extra benefits approved by Congress near the start of the pandemic expired at the end of July. In early August, President Trump issued an executive action allowing states to tap disaster-relief funds for $300 a week in enhanced aid.

“It’s key to the U.S. economy that the unemployment benefits continue to be delivered to the consumers, the households,” said Sophie Chardon, cross-asset strategist at Lombard Odier. “Consumer confidence is still very fragile.”

The Swiss private bank is taking a cautious stance, having dialed back its exposure to stocks and bought cash. “The recovery is very uneven and incomplete,” Ms. Chardon said.

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Yields on 10-year Treasury notes slipped to 0.666%, from 0.670% Monday, ahead of Mr. Powell’s testimony. The WSJ Dollar Index, which tracks the U.S. currency against a basket of others, gained 0.2%, adding to its biggest one-day advance in over a month.

International stock markets were mixed. The Stoxx Europe 600 gained 0.5%, clawing back some ground after suffering its biggest fall since mid-June.

Asian markets followed U.S. shares lower. The Shanghai Composite Index fell 1.3% by the close, while South Korea’s Kospi shed 2.4%.

Commodity markets steadied, with U.S. crude futures gaining 1.4% to $40.09 a barrel and gold futures edging down to $1,910 a troy ounce.

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