By Shubham Batra and Shashwat Chauhan
(Reuters) -Wall Street's main indexes were set to open higher in volatile trading on Tuesday as investors looked for bargains after a rout in the previous session, while dovish rate commentary from Federal Reserve officials also lifted the mood.
Most megacap and growth stocks, which together lost $200 billion in market value on Monday, gained in premarket trading with Nvidia (NASDAQ:NVDA) bouncing back 2.6%.
Apple (NASDAQ:AAPL) slipped 1.3%, extending a nearly 5% drop on Monday after Warren Buffett's Berkshire Hathway cut stake in the iPhonemaker by half.
Both the S&P 500 and the Nasdaq Composite posted losses of at least 3% each in the previous session after weak economic data raised worries of a U.S. recession and the unwinding of sharp positions of carry trades that fund high-yielding assets.
Goldman Sachs in a note said that investors typically profit when they buy after a 5% selloff in the S&P 500 index.
"We're getting a relief rally specifically because the yen depreciated a little bit overnight and that would remove the pressure for margin calls, so the selling pressure has abated, which provides an opportunity for the market to rise with some buyers coming to the table," said David Waddell, CEO and chief investment strategist at Waddell & Associates.
U.S. central bank policymakers pushed back on Monday against the notion that weaker-than-expected July jobs data means the economy is in recessionary freefall, but also warned that the Fed will need to cut rates to avoid such an outcome.
Traders currently see an about 75% chance of a 50-basis-point rate cut in September, down from 85% on Monday and expect the year-end rates at 4.25%-4.50%, according to CME's FedWatch Tool.
Top brokerages including J.P. Morgan, Citigroup and Wells Fargo (NYSE:WFC) have forecast a 50-basis-point interest rate cut by the U.S. central bank in September after the surprisingly weak employment report.
A closely watched gap between the two- and 10-year benchmark yields turned positive on Monday, which typically indicates that the economy is heading into a downturn.
The CBOE Volatility index, also known as Wall Street's "fear gauge", was at 32.72 points after hitting a high of 65.73 on Monday.
At 8:30 a.m. ET, Dow E-minis were up 185 points, or 0.48%, S&P 500 E-minis were up 27.75 points, or 0.53% and Nasdaq 100 E-minis were up 90.75 points, or 0.50%.
Futures tied to the Russell 2000 small caps index also advanced 0.5%.
Among other movers, Palantir Technologies (NYSE:PLTR) surged 11.2% after the software services provider raised its annual revenue and profit forecasts for the second time this year.
Caterpillar (NYSE:CAT) added 3.1% after reporting a rise in its quarterly adjusted profit, lifted by resilient demand for its large excavators and other construction equipment on the back of increased infrastructure spending in the United States.
Uber (NYSE:UBER) jumped 8.2% after it beat Wall Street estimates for second-quarter revenue and core profit, helped by steady demand for its ride-sharing and food-delivery services.
CrowdStrike (NASDAQ:CRWD) rose 3.6% after brokerage Piper Sandler raised its stock rating to "overweight" from "neutral".