US pre-open: Stocks to recover after Friday's losses but jitters remain

US futures pointed to firmer open on Wall Street on Monday following heavy losses at the end of last week, on what will be a holiday-shortened trading session ahead of the Christmas break.

At 1145 GMT, Dow Jones Industrial Average and S&P 500 futures were up 0.4% and 0.5%, respectively, while Nasdaq futures were 0.8% higher.

CMC Markets analyst Michael Hewson said: "As we look ahead to the scorecard for 2019 and look back at 2018 I think it’s safe to assume that the ‘buy the dip’ mentality that has been so effective over the last ten years may well now be over, given the declines we’ve seen in the last quarter or so.

The big question is whether the selloff we’ve seen in the last few weeks has further to go or whether we could be near a short term base?

"One of many reasons why investors have got more than a little spooked is down to valuations, the outlook for global growth, as well as concern over the direction of Fed policy, which has seen US yields slide sharply after peaking at multi year highs earlier this year.

"Uncertainty over the future direction of Fed policy has seen US policymakers start to resile from expectations around multiple rate rises next year, though markets still appear to be clinging to the possibility of one rate rise next year.

"Much will depend on how the US/China trade talks and truce play out in the weeks ahead and whether additional tariffs get imposed, but this line of thought of two more hikes has more than an element of wishful thinking about it."

On Friday, US equity markets tumbled amid worries about global economic growth and the temporary US government shutdown. The Dow slumped 1.8% to 22,445.37, the S&P 500 closed down 2.1% at 2,416.62 and the Nasdaq slid 3% to 6,332.99.

The Nasdaq officially entered bear market territory on Friday, trading down 22% from its highs at the end of August. Meanwhile, the S&P and the Dow were edging ever closer.

Investors were digesting comments from Trump’s acting chief of staff, Mick Mulvaney, who suggested that the government shutdown that kicked off at midnight on Friday after Trump and the Democrats remained at odds over funding for a border wall with Mexico, could continue right up to the opening of the next Congress on 3 January.

Comments from White House trade adviser Peter Navarro were also in focus after he said the US might not reach a trade deal with China in the next three months unless Beijing can agree to a "profound overhaul" of its trade and industrial practices.

In addition, Treasury Secretary Steve Mnuchin held calls with top US bankers over the weekend following the recent selloff in equity markets and convened a "Plunge Protection Team". Rumours about Trump asking whether he could fire Jerome Powell as chair of the Federal Reserve were also swirling over the weekend.