U.S. stock futures rose early Monday morning after a sell-off in tech shares led to the market’s first back-to-back weekly declines in months.
Dow Jones Industrial Average futures traded 306 points higher. The S&P 500 and Nasdaq 100 futures were also in positive territory.
Sentiment was lifted in part by news of Nvidia buying chip maker Arm Holdings from SoftBank for $40 billion. Nvidia will finance the deal through a combination of cash and common stock.
The S&P 500 fell by 2.5% last week. It was the broader-market index’s worst one-week drop since June 26. That decline also marked the first time since May that the S&P 500 closed lower in two straight weeks.
Those losses were driven in large part by a steep drop in tech, the best-performing market sector year to date. The S&P 500 tech sector plunged more than 4% for its biggest weekly loss since March. Apple, the biggest U.S. company by market cap, dropped more than 7% last week.
“The excessive Technology froth from August has been wiped away, but in its wake, clear and ominous topping patterns like … developed,” said Frank Cappelleri, executive director at Instinet, in a note.
To be sure, Sean Darby of Jefferies thinks this decline in tech could be short-lived.
“There is nothing untoward about the fundamentals nor earnings expectations. An upside surprise would come from further dollar weakness, while the emergence of a vaccine and/or a rise in long-term rates would curb performance,” said Darby, a global equity strategist at the firm.
Investors are coming into the new week amid dwindling hope of lawmakers striking a deal on new fiscal stimulus.
Senate Majority Leader Mitch McConnell, R-KY, said on Friday the chances of Republicans and Democrats reaching a deal don’t “look that good right now.” Earlier this month, House Speaker Nancy Pelosi, D-Calif., said Democrats and the White House had “serious differences” over coronavirus aid.
Meanwhile, the number of U.S. coronavirus cases are growing by 5% or more in 11 states, according to a CNBC analysis of Johns Hopkins University data. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said last week that recent coronavirus data was “disturbing.”
In corporate news, ByteDance rejected Microsoft’s bid to buy TikTok’s U.S. operations.