Stock Market Today: Stocks cautiously higher after $1.3 trillion selloff

U.S. equity futures bounced higher in early Tuesday trading, while the dollar extended declines against its global peers, as investors looked for a pause to yesterday's brutal selloff the dragged the S&P 500 closer to correction territory amid its biggest decline of the year.

Stocks were pummeled across the board yesterday, with the tech-focused Nasdaq suffering its biggest decline since October of 2022 and the S&P 500 down 2.7% on the session, and shedding $1.32 trillion in value, amid renewed recession fears tied to the tariff, spending and immigration policies of President Donald Trump.

The longer-run declines, which began as the President vacillated on imposing tariffs on America's key trading partners last month, have collectively wiped out more than $4 trillion in U.S. equity value as the S&P 500 has fallen 8.6% from its Feb. 19 peak.

The Nasdaq, meanwhile, is down more than 13.1% from its mid-December apex, and slumped more than 4% during yesterday's session amid a 15% plunge in Tesla  (TSLA)  shares and pullbacks for Magnificent 7 peers such as Nvidia  (NVDA)  and Apple  (AAPL) .

"It had been widely expected that Donald Trump’s policies, whilst widely trailed in his election campaign, would in reality be watered down in order to maintain a business-friendly environment conducive to ongoing gains in the stock market," said Lindsay James, investment strategist at London-based Quilter Investors.

"However, the reality so far has been quite different, with on again/off again tariffs and no clear lines of negotiation, all perhaps designed to support his broader goal of seeing a manufacturing resurgence in the US," he added. "With the promised tax breaks for firms that shift supply chains sitting in budget reconciliation, it is unclear whether firms will buy into his vision and go through the upheaval of moving to a higher cost jurisdiction to avoid what could ultimately be a one-term policy."

Analysts see the potential for more declines ahead, as well, with Citigroup following rival HSBC in downgrading U.S. stocks to 'neutral' from 'overweight' in a note published late Monday, citing a "pause in U.S. exceptionalism".

That said, Wall Street is looking at a modest rebound heading into the Tuesday session, with futures contracts tied to the S&P 500 indicating an 18 point opening bell gain and those linked to the Dow Jones Industrial Average priced for a 115 point advance.

The Nasdaq, meanwhile, is called 85 points higher with premarket gains for Tesla, Nvidia and Palantir Technologies  (PLTR) .

The market's key volatility gauge, however, remains firmly elevated, and trading near the highest levels of the year, suggesting big moves are expected over the coming days.

The CBOE Group's VIX index was last marked 16.1% higher in after-hours trading at $27.12, a level that suggests daily swings of around 1.7%, or 95 points, for the S&P 500. 

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In overseas markets, Europe's Stoxx 600, which has outperformed the S&P 500 by around 10% so far this year, edged 0.1% lower in mid-day trading in Frankfurt, while Britain's FTSE 100 slipped 0.13% lower in London.

Overnight in Asia, last night's selloff dragged Japan's Nikkei 225 0.64% lower by the close of trading, with the regional MSCI ex-Japan benchmark falling 0.48%.

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