US Stock Futures Little Changed As Traders Brace For Q2 Reports From Alphabet, Tesla: 'There Remains Strong Fundamental Support For Large Caps,' Says Economist

Author: Shanthi Rexaline | July 23, 2024 07:36am

The market mood turned jittery after Monday’s rebound, with index futures trading on either side of the unchanged line early Tuesday. The apprehensions reflect uncertainties regarding geopolitics, monetary policy, and the health of the reporting season ahead of earnings from AI stalwart Alphabet, Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) and electric-vehicle giant Tesla, Inc. (NASDAQ:TSLA). The Google-parent’s earnings could be seen as a foretaste of what is to come from the rest of the AI-levered stocks.

Earnings news has been mixed. The tidings on the economic front are scarce, with only a housing market report due for the day. That said, traders may choose to remain cautious ahead of some key readings, including Friday’s inflation data.

Futures	Performance (+/-)
Nasdaq 100	-0.02%
S&P 500	+0.08%
Dow	+0.11%
R2K	+0.23%

Stocks went racing higher on Monday as traders assessed the implications of President Joe Biden’s withdrawal from the race and looked ahead optimistically to the week’s earnings report. Beaten-down tech stocks spearheaded the recovery on a day when most S&P 500 sector indices, barring energy and consumer staples, advanced.

The major averages opened higher, with the Nasdaq Composite Index and the S&P 500 Index moving roughly sideways with strong gains for the rest of the session. In the process, the former broke back above the 18,000 barrier. The Dow Jones Industrial Average experienced some volatility in the morning before moving decisively into the positive terrain and ending modestly higher.

Small-caps resumed their rally, with the Russell 2,000 Index outperforming the major averages.

Index	Performance (+/-)	Value
Nasdaq Composite	+1.58%	18,007.57
S&P 500 Index	+1.08%	5,564.41
Dow Industrials	+0.32%	40,415.44
Russell 2000	+1.66%	2,220.65

Insights From Analysts:

Wharton Professor Jeremy Siegel, Senior Economist to WisdomTree, commented on the dramatic shifts within the equity market, the ones happening among small- and large-cap stocks, as well as value and growth stocks. The strength in the small-cap stocks following favorable inflation data indicates a market highly responsive to even subtle shifts in monetary policy expectations, he said.

The economist said, “There remains strong fundamental support for large caps—their earnings expectations have increased much more than small caps.” If the recent shifting tides were to sustain and last long “we will also need to see small and value stocks further reverse the huge gains in growth stocks over the previous three months,” he said.

The professor also weighed in on the U.S. election landscape. Biden's exit from the race makes Vice President Kamala Harris a virtual certain nominee, she said. The betting markets predict a close race between Harris and Trump but the former still may not beat the latter, he said.

“However, the probability that the House goes Democratic has increased, and the prospects of a split government is encouraging to stock investors,” Siegel said.

In an interview with CNBC on Monday, Tom Lee, Head of Research at Fund Strat, reiterated his call for a 40% rally in small-caps by the end of the summer. He remised his call on the relatively higher sensitivity of these stocks to a Fed rate cut and the probability of it.

Upcoming Economic Data:

• The National Association of Realtors is scheduled to release its existing home sales report for June at 10 a.m. EDT. Economists, on average, expect existing home sales to come in at a seasonally adjusted annual rate of 3.59 million units compared to the 4 million-unit rate for May.
• The Richmond Fed’s manufacturing and services sector survey results for July are due at 10 a.m. EDT.
• The Treasury will auction 2-year notes at 1 p.m. EDT.

See Also: How To Trade Futures

Stocks In Focus:

• Agilysys, Inc. (NASDAQ:AGYS) fell over 3% in premarket trading following the company’s quarterly earnings release and NXP Semiconductors N.V. (NASDAQ:NXPI) slipped over 8% on weak revenue and outlook and Medpace Holdings, Inc. (NASDAQ:MEDP) plunged nearly 13%.
• Coca-Cola Company (NYSE:KO), Freeport-McMoRan Inc. (NYSE:FCX), GE Aerospace (NYSE:GE), General Motors Company (NYSE:GM) (up over 5%), Kimberly-Clark Corporation (NYSE:KMB), Lockheed Martin Corporation (NYSE:LMT), Philip Morris International Inc. (NYSE:PM), PulteGroup, Inc. (NYSE:PHM), Quest Diagnostics Incorporated (NYSE:DGX), Spotify Technology S.A. (NYSE:SPOT) (up over 14%), Polaris Inc. (NYSE:PII) (down over 17%), and United Parcel Service, Inc. (NYSE:UPS) are among the notable companies reporting ahead of the market open.
• Those reporting after the close include Alphabet, Capital One Financial Corporation (NYSE:COF), Chubb Limited (NYSE:CB), Mattel, Inc. (NASDAQ:MAT), Packaging Corporation of America (NYSE:PKG), Seagate Technology Holdings plc (NASDAQ:STX), Tesla, Texas Instruments, Inc. (NASDAQ:TXN) and Visa Inc. (NYSE:V).

Commodities, Bonds And Global Equity Markets:

Crude oil futures fell further toward the $78-a-barrel mark and gold futures advanced. The 10-year Treasury yield fell 3.1 points to 4.228%. Bitcoin (CRYPTO: BTC) fell below the $67K mark, while Ethereum (CRYPTO: ETH) rose modestly as the SEC approved Ethereum ETFs, which could begin trading as early as Tuesday.

Asian stocks traded mixed once again, with the Chinese and Hong Kong markets pulling back notably, while the Japanese, Indian and Indonesian markets ended slightly lower. The rest of the major markets in the region advanced, tracking the positive lead from Wall Street overnight amid the tech rebound.

European stocks were firmly in the green in early trading.

Read Next:

• Tesla, Alphabet, GM, Ford Lead Earnings Parade This Week As Market Struggles To Sustain The Summer Rally

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