Nasdaq 100 and Russell 2000: Tech Giants and Small Caps in the Spotlight Today

Market Rotation Continues as Wall Street Awaits Earnings

Stock futures rose Monday as investors prepare for a busy week of corporate earnings and the Federal Reserve meeting. The recent cooling of the tech trade has driven major indexes lower, but a broader market rotation is underway.

At 13:15 GMT, Dow Futures are trading 40943.00, up 112.00 or +0.27%. S&P 500 Index futures are 5518.75, up 19.75 or +0.36% and Nasdaq Futures are trading 19298.75, up 124.25 or +0.65%.

Small Caps Rally

The iShares Russell 2000 ETF (IWM) gained 0.9% in premarket trading, signaling continued strength in small-cap stocks. The Russell 2000 index ended last week 3.5% higher and is up 12% over the past month. This rotation is fueled by expectations of interest rate cuts and an improved inflationary environment, which could benefit cyclical sectors with higher financing costs.

Earnings in Focus

This week’s earnings reports from tech giants Microsoft, Meta Platforms, Apple, and Amazon will be crucial in determining whether the sector can rebound. Additionally, McDonald’s reported disappointing second-quarter results, with shares dipping slightly in premarket trading.

Fed Meeting Looms

The Federal Reserve’s policy meeting on Wednesday will be a key event for traders. While no rate cut is expected this week, investors will scrutinize the statement for clues about potential moves in September.

Notable Stock Movements

Several stocks saw significant premarket movement:

• McDonald’s shares dipped after missing analyst expectations for Q2 results
• Revvity gained 6% after beating earnings expectations
• Olin added 1.4% following a JPMorgan upgrade to overweight
• Akamai Technologies rose 2% after an upgrade to buy rating
• Bristol-Myers Squibb shed 1.5% following a downgrade to underweight
• Tesla advanced 1.5% after being named top U.S. auto stock pick by Morgan Stanley
• Stellantis retreated 3.6% after a Deutsche Bank downgrade to hold

• Coinbase and Microstrategy each climbed around 4%, following Bitcoin’s upward movement
• Disney ticked nearly 1% higher after a strong box office showing from “Deadpool & Wolverine” 

Market Forecast

The short-term outlook appears cautiously bullish, with a broader market participation developing. However, historical data suggests the recent S&P 500 decline may not be over. Since 1990, 68% of declines of 4.5% or more became pullbacks within weeks. Traders should watch for continued rotation into small caps and cyclical sectors while monitoring tech earnings for signs of a potential rebound.

Technical Analysis

E-mini S&P 500 Index futures are edging higher on Monday. The benchmark index is currently straddling the upsloping 50-day moving average at 5505.29. A sustained move over this level could lead to a strong move today.

A failure to overcome the 50-day moving average will indicate that investors are still unsure about the Fed and tech earnings. This could lead to a retest of the 50% level at 4563.25, followed by last week’s low at 5432.50.