Beware the Sunday Scaries: How Futures Can Mislead

Most people with Monday-through-Friday jobs likely grapple now and then with "Sunday night scaries," that feeling of dread when the impending week and its tribulations loom after a weekend away.

Sunday night scaries happen in the market too, especially in volatile periods when weekend news shapes overnight futures trading before Monday's regular session open.

U.S. stock index futures start trading at 6 p.m. ET on Sunday, and investors checking their phones that evening might feel a chill if they see red. Yet a dramatic slide at that inconvenient time doesn't necessarily mean anything spooky ahead on Monday. Nor does a Sunday evening rally guarantee big gains the next day.

A recent example of how overnight action can mislead occurred the weekend of March 7–8, 2026, shortly after the Iran war began. The intraday candlestick chart below starts early on Friday, March 6 and covers trading throughout that overnight session and into Friday's regular trading. It resumes when S&P 500 futures (/ES) opened for overnight trading Sunday.

Friday was relatively quiet in terms of volatility and index moves. That quickly changed with a sharp plunge in the first minute of futures trading Sunday evening. Ultimately, S&P futures hit overnight lows well below Friday's early peak. The volume tracker (lower level of chart) shows much lighter levels throughout the overnight hours, with volume picking up once regular trading began in the equities market early Monday.

There's a term for markets that move overnight and then stabilize during the day session. "The overnight drift" was coined in a 2020 white paper by the Federal Reserve Bank of New York and refers to U.S. equity returns not being equally divided around the clock since electronic overnight trading began in the late 1990s.

"In fact, the largest positive returns are between 2 (a.m.) and 3 a.m.—the opening of European markets in U.S. Eastern Time terms," the paper found. "We dub these positive average returns the 'overnight drift' and argue the pattern is most likely driven by the overnight resolution of order imbalances arising from the end of the preceding U.S. trading day."

A 2011 study published in the Journal of Asset Management also found that market returns were generally better overnight than during the day.

"With the continued expansion to 24/5 trading, retail investors have more and more ability to capture this so called 'overnight drift,' and international investors have more opportunity to participate in U.S. markets without having to significantly alter their lifestyle, given for many, U.S. markets are open during inconvenient hours," said Alex Coffey, senior trading and derivatives strategist at Schwab.

The authors of the Fed paper found that overnight reversals are larger when market uncertainty is higher—which likely won't surprise anyone who followed the markets in March 2026. And their research showed that when sell-offs occur at the end of the previous day's session, there are larger positive overnight reversals. Rallies in the day tend to produce much smaller overnight reversals.

One reason for sharper moves in the wee hours of trading is that markets typically see less volume overnight, meaning there can be wide spreads between the bid (the highest price offered by all buyers) and the ask (the lowest price offered by all sellers). This lower liquidity can exaggerate price moves, leading to incorrect assumptions about just how badly the market sees things. Volume during overnight hours when Asian markets were open was 50 to 100 times lower than during U.S. trading hours, according to the Fed's paper.

The tendency toward volatility applied to all overnight trading, not just Sundays, studies found. However, there's evidence in studies that Sunday nights see more "drift" than overnight trading on other nights of the week. This might be because when geopolitical turbulence is heightened, Sunday night offers the first chance to trade any weekend developments. Also, investors have the weekend to read, study, and possibly rethink the markets, meaning Sunday night they might put their money to work based on those reflections.

Some studies also show certain stocks perform better at night than others, Bloomberg reported in 2022. Those that tend to do better overnight include stocks well known to retail traders and frequently appearing in news reports. Think Magnificent 7.

Stocks with relatively high overnight returns during the previous month tend to have high overnight returns and low intraday returns the following month, according to a study published in 2019 in the Journal of Financial Economics. In other words, what happens at night sometimes stays there.

Though extended-hours trading has limitations and can cause exaggerated moves that don't play out in the regular session, that doesn't mean investors should ignore overnight action. After-hours trading can provide convenience for traders whose schedules don't allow them to trade during the normal day session. Also, after-hours trading allows traders to react quickly to news events, including earnings from companies that release results after the close of the regular session.

"Overnight trading serves several purposes," Coffey said. "It allows the market to react to things as close to real time as possible versus waiting until the market opens at some future point. This allows for true price discovery and risk management. S&P 500 futures also provide a point of liquidity for market participants from all over the world to hedge and express market sentiment through their trades."

Investors with long-term horizons might want to consider taking any scary Sunday night futures moves in stride and enjoy the end of their weekends. Even short-term traders need to exercise care before looking at overnight activity ahead of a new week.