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Index futures trading indicates cautious optimism as traders anticipate a busy week, with a slew of earnings reports, the two-day Federal Open Market Committee meeting starting Tuesday, and Friday’s non-farm payrolls report. Traders may look to take a position in stocks that have pulled back during the recent market retreat ahead of what they perceive to be a strong reporting season.
Microsoft Corp. (NASDAQ:MSFT), Apple, Inc. (NASDAQ:AAPL), Amazon, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:AMZN) are among the key tech earnings due this week, potentially setting the tempo for the market.
| Futures | Performance (+/-) |
| Nasdaq 100 | +0.61% |
| S&P 500 | +0.41% |
| Dow | +0.39% |
| R2K | +0.60% |
In premarket trading on Monday, the SPDR S&P 500 ETF Trust (NYSE:SPY) moved up 0.38% to $546.50, and the Invesco QQQ ETF (NASDAQ:QQQ) gained 0.57% to $465.63, according to Benzinga Pro data.
Cues From Last Week:
U.S. stocks meandered to a mixed close in the week ended July 26, with the Nasdaq Composite and the S&P 500 declining for a second straight week amid some disappointing tech earnings. The blue-chip Dow Jones Industrial Average rose moderately, while the Russell 2,000 Index advanced notably for the week.
The major averages started the week on a positive note but negative reactions to earnings from the likes of Tesla, Inc. (NASDAQ:TSLA) and Alphabet, Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) pushed the tech-heavy Nasdaq Composite and the S&P 500 Index lower for the next three sessions. With the Fed’s favorite inflation gauge released Friday coming in tamer than expected, the indices rebounded and yet ended the week notably lower.
The small-cap rally continued unabated as rate-cut bets prompted investors to bid up these stocks.
| Index | Week’s Performance (+/-) | Value |
| Nasdaq Composite | -2.08% | 17,357.88 |
| S&P 500 Index | -0.83% | 5,459.10 |
| Dow Industrials | +0.75% | 40,589.34 |
| Russell 2000 | +3.47% | 2,260.07 |
Insights From Analysts:
LPL Financial Chief Global Strategist Quincy Krosby sees the small-cap rally as more than a function of mere expectations that the Fed will cut interest rates. In a note released Friday, the strategist said attractive valuations have also underpinned sentiment. He pointed to another narrative. “There's also a strong narrative that the ongoing de-globalization could serve as a fundamental catalyst for small and mid-cap names,” he said.
Also, small-caps continue to see inflows despite the political ebb and flow, and mixed economic signals, and this according to Krosby is an indication that “they see a solid economic backdrop coupled with lower interest rates.” “The small caps – with a higher risk profile than the S&P 500 – is known to sell off quickly when they perceive a material change in direction,” he added.
Yardeni Research’s President and Chief Investment Strategist Ed Yardeni said the market will likely churn around the current levels under the July 16 high (closing) of 5667.20 through the presidential election before pushing toward new highs by the end of the year.
Upcoming Economic Data:
The Fed meeting scheduled for July 30-31 and the July non-farm payrolls report due Friday are the key Main Street catalysts for the week. ADP’s private payrolls data for July released Wednesday could also evince some interest. Traders may also focus on S&P Global’s final July manufacturing activity data, the Institute for Supply Management’s manufacturing purchasing managers’ index for July and a regional business barometer.
Twin May house prices data, the weekly jobless claims data, the June Job Openings and Labor Turnover survey results, the second-quarter employment cost index, and the June pending home sales as well as the June factory goods orders data round up the economic events of the week.
On Monday, the Dallas Fed will release its manufacturing business index for July at 10:30 a.m. EDT.
The Treasury will auction three- and six-month notes at 11:30 a.m. EDT.
See Also: How To Trade Futures
Stocks In Focus:
Commodities, Bonds And Global Equity Markets:
Crude oil futures have started the week on a weak note, as they pulled back below the $77-a-barrel mark and gold futures also fell modestly. The yield on the 10-year Treasury note fell 4.1 points to 4.158%. Bitcoin (CRYPTO: BTC) climbed over 3% and approached the $70K psychological barrier.
Most Asian markets rallied, led by the Japanese and Hong Kong markets, as regional investors cheered the rebound of U.S. stocks last Friday. The Japanese also awaited the Bank of Japan’s rate decision due this week. The Chinese market ended with a more muted gain, while the New Zealand market bucked the trend and ended modestly lower.
European stocks rallied sharply as traders digested positive earnings reports from the region.
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