Stock futures opened in slightly positive territory on Tuesday, holding onto gains after a tech-led rebound rally during the regular session.
Contracts on the S&P 500 ticked up. Earlier, Big Tech stocks led the blue-chip index higher, with investors swooping in to buy a dip in growth and technology names after a rout on Monday. That sent the Nasdaq higher by 1.3% in the index's best day since August.
So far in October, equities have see-sawed between steep gains and losses, with investors struggling to ascertain whether the economic and policy backdrop will be supportive enough for risk assets to prevent a repeat of September's volatility. The CBOE Volatility Index, or VIX, has hovered above 20, after spending much of the summer in the mid-teens.
"It's unclear what October holds. I have a big question market in my mind: Could it be the ugly sequel to September?" Kristina Hooper, Invesco U.S. chief global market strategist, told Yahoo Finance Live on Tuesday.
"Certainly what we've seen thus far is that any time there is a selloff, investors are quick to move in and find opportunities," she added. "I would assume that we're likely to see more volatility going forward as we anticipate the Fed's tapering announcement. And so that creates an announcement where investors can dollar-cost average on down days in areas where they would like to, and where they're interested in adding exposure. This is probably not the only selloff we'll see for October."
One of the primary concerns for markets has been around inflation, with prices of goods and services rising for both businesses and end users as demand remains elevated and supply chain constraints continue to weigh. Traders have been waiting to see whether these persistent issues ultimately drag on economic activity and corporate profits, with details on the latter set to come into focus with the unofficial start of third-quarter earnings season next week with the big banks.
At least for now, the latest batch of economic data has been largely upbeat on the state of the U.S. economy. Durable goods orders, retail sales and purchasing managers' indices tracking activity across both the U.S. manufacturing and services sector have all recently topped expectations. However, this data has also brought copious signs of inflation: A subindex tracking prices paid by suppliers rose in the Institute for Supply Management's latest services index, and personal consumption expenditures rose at the highest annual rate since 1991 based on government data released last week.
"It's not a surprise that the world 'stagflation' is coming back into everybody's vernacular. Energy prices are going up, these cargo ships are stacked up on both sides of the coast, shortages of everything … and those prices are going up. But the core news is good," Simeon Hyman, ProShares Advisors head of investment strategy, told Yahoo Finance Live on Tuesday.
"Is there going to be a little bit of inflation? Probably. Are rates going to go up? Just with tapering, almost absolutely," Hyman added. "But will there be a contraction of economic activity? Very unlikely — the economy is likely to remain pretty strong."
6:10 p.m. ET Tuesday: Stock futures hold onto gains
Here's where markets were trading Tuesday evening:
S&P 500 futures (ES=F): +3.75 points (+0.09%), to 4,337.75
Dow futures (YM=F): +50 points (+0.15%), to 34,233.00
Nasdaq futures (NQ=F): +13.75 points (+0.09%) to 14,669.00
NEW YORK, NEW YORK – SEPTEMBER 30: Traders work on the floor of the New York Stock Exchange (NYSE) on September 30, 2021 in New York City. In afternoon trading the Dow was down over 250 points as investors continue to worry about inflation, wages and supply chain issues. (Photo by Spencer Platt/Getty Images)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter