U.S. stock futures were solidly higher early Tuesday, building on a strong rally in the previous session as concerns about a speculative retail trading frenzy eased.
Futures contracts tied to the Dow Jones Industrial Average pointed to an opening gain of more than 250 points. S&P 500 futures jumped 0.9% and Nasdaq 100 futures also gained 0.8%.
The rise in futures as well as the market gains on Monday coincided with a sharp reversal in GameStop, the video game retailer that captivated Wall Street with its massive short squeeze coordinated by a band of retail investors on social media. GameStop, fresh off a 400% rise last week, slid 30% on Monday and fell another 30% in premarket trading.
Other highly speculative investments popular with the Reddit crowd also started to decline. AMC Entertainment dropped more than 20% in premarket. Futures contracts for silver, which enjoyed their biggest one-day jump in 11 years Monday, slid more than 5% Tuesday.
Some investors took it as a sign that the speculative mania from retail traders is unwinding, which is healthy for the overall market.
"The GME nonsense seems to be abating as the fever around that cohort of stocks starts to break," Adam Crisafulli, founder of Vital Knowledge, said in a note.
On Monday, the Dow added more than 200 points and S&P 500 posted its best day since November all 11 sectors rose. The stock market was coming off its worst week since October as many grew worried the wild trading activity in those heavily shorted names could be contagious and spill over to other areas of the markets.
Investors will be met with a slew of earnings on Tuesday, including industry leaders Pfizer and ExxonMobil before the bell. Tech giants Amazon and Alphabet will report after the market close.
The market has appeared to shrug off even some of the stronger quarterly reports this earnings season, and Ally Invest chief investment strategist Lindsey Bell said on "Closing Bell" that those movements may mean the good news was already priced in to stocks after a strong close to 2020 for equities.
"While these reports were not just good, they were better than expected and you would want to see the stocks move a little bit higher, it's almost understandable that they haven't," Bell said.
Investors will also be following stimulus negotiations in Washington, where congressional Republicans made a counteroffer to President Joe Biden's $1.9 trillion stimulus plan on Sunday.
Biden met with those lawmakers on Monday as congressional Democrats moved toward passing a reconciliation bill without bipartisan support. White House press secretary Jen Psaki described the meeting as "substantive and productive."
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