Stock futures rise after Wall Street suffers first drop in three sessions

Strategas' Chris Verrone on Average Stocks vs. the Broader Market

Stock futures were higher early Tuesday after closing lower on the day, ending a two-day rally that started as a better-than-expected inflation report stoked hopes that the Federal Reserve would soon ease back on rate hikes.

Futures tied to the Dow Jones Industrial Average rose 117 points, or 0.35%. S&P 500 futures and Nasdaq 100 futures were up 0.46% and 0.71%, respectively. TSMC, Louisiana-Pacific and paramount Shares soared after regulatory filings showed Warren Buffett’s Berkshire Hathaway bought new positions in the first two stocks and added to the last.

Investors are also watching the filings to see which stocks top investors Michael Burry, Bill Ackman, David Tepper and others bought or sold in the third quarter.

Stocks rose sharply on Monday on comments from Fed leaders Lyle Brainard and Chris Waller about future rate hikes. While Brainard said the central bank could ease into rate hikes, Waller said markets were too optimistic and should brace for higher rates.

“The key talking point in markets this week will be the Fed’s response after last week’s sharp rally in stocks and a reversal in the dollar following weaker-than-expected CPI,” Huw Roberts, head of analytics at Quant Insight, wrote in a Monday note.

He added that this week “will be critical” on how much the speakers rebut or agree with the market’s recent moves.

Stocks fell after reports that Amazon would lay off about 10,000 workers, possibly starting this week.

Markets will get more information on inflation on Tuesday when the producer price index, which measures wholesale inflation, is released. Investors will also study comments from Philadelphia Fed President Patrick Harker, Fed Governor Lisa Cook and Fed Vice Chair Michael Barr.

Earnings season continues this week with retail sales reports on the horizon. Walmart and Home Depot report earnings on Wednesday, while Target, Lowe’s, Bath and Body Works, Macy’s, Kohl’s and Foot Locker are due later in the week.

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