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Dow Futures Soar Extra Than 300 Factors After Falling On Monday; Fed assembly is imminent

US stock futures were higher in early morning trading Tuesday after a large sell-off on Wall Street that led to the S&P 500's worst day since May.

Dow Jones futures rose 358 points. S&P 500 futures and Nasdaq 100 futures both traded in positive territory.

Key averages fell on Monday on a clash of concerns including the upcoming Federal Reserve meeting, the lingering Delta variant, a possible economic disruption in China and the debt ceiling deadline.

However, the shares closed well from their daily lows.

The S&P 500 lost its worst day since May 12th of this year by 1.7%. At its daily low, the average of 500 stocks on an intraday basis declined 5% from its high. It is currently 4.1% of its record.

The Dow Jones Industrial Average plunged 614 points, or 1.8%, the largest one-day decline since July 19. The Nasdaq Composite lost 2.2% as the market's emerging markets were hardest hit.

The Federal Reserve begins its two-day monetary policy meeting on Tuesday, and investors are looking for more information from Chairman Jerome Powell on the central bank's plans to curb its bond purchases, particularly when it will happen. Powell said last month that sometime this year the Fed would slow down its $ 120 billion monthly purchases.

The Fed publishes its quarterly economic forecast, the so-called dot plot, together with the interest rate declaration at 2 p.m. ET Wednesday. Powell will hold a press conference afterwards.

"We need to see evidence that the Fed's dot plots aren't coming out in a way that scares the market, ”said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

The weakness in the Chinese stock market was reflected in US stocks on Monday. The benchmark Hang Seng index plummeted 4% as ailing real estate developer China Evergrande Group was on the verge of default.

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"We need to see evidence that the Chinese government is taking steps to address this," added Ma.

The Delta variant remains a global health threat as the colder months approach and some Americans hesitate to vaccinate.

Stocks linked to global growth fell on Monday and energy stocks took a hit thanks to a 2% drop in US oil prices. The banks' stops fell as bond yields fell.

The Cboe volatility index, Wall Street's fear meter, jumped above 26 on Monday, its highest level since May.

Investors are also concerned about the deadline for raising the debt ceiling and possible tax increases. Congress returned to Washington from hiatus and rushed to pass funding laws to avoid government shutdown.

September is a historically volatile month for stocks and after the S&P 500 rallied 16% since the start of the year, many investors have said the market is due to pull back. Some strategists called the sale on Monday a buying opportunity.

"The market sell-off that escalated overnight is, in our opinion, mainly driven by technical sales flows ((commodity trading advisors) and option hedgers) in an environment of low liquidity and the overreaction of discretionary traders to perceived risks," said Marko Kolanovic, JPMorgan chief global market strategist. said in a note on Monday.

While others said the volatility is likely to continue until some of the risks are addressed.

"We don't think this small pullback is a special buying opportunity," said Ma. "There could easily be more volatility depending on what happens to the Fed meeting … similar to the debt ceiling. With the overhang and negotiations that follow, this will definitely be taken to extremes."

Cryptocurrencies also pulled back on Monday, with Bitcoin ending the day about 7% lower. The slide sparked the debate about whether Bitcoin can or should serve as a safe haven.

FedEx, Adobe, AutoZone and Stich Fix are reporting quarterly results on Tuesday.

– with reports from CNBC's Hannah Miao.

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