NASDAQ 100, Dow Jones, S&P 500: Flat Pre-Market Trade as Tech-Powered Rally Loses Momentum

Highlights

• US stock futures flat as tech-powered rally loses momentum.
• S&P 500 slides 0.5% and on track to break five-week win streak.
• Intel’s turnaround plan and Powell’s remarks weigh on market sentiment.

Overview

US stock index futures remained flat in overnight trading on Wednesday, following three consecutive days of declines as the tech-powered rally lost momentum.

At 07:56 GMT, blue-chip Dow futures are trading 34143.00, down 92.00 or -0.27%. Benchmark S&P 500 Index futures are at 4398.25, down 11.00 or -0.25% and tech-heavy Nasdaq Composite futures are trading 15000.25, down 43.75 or -0.29%.

The S&P 500 recorded its worst daily performance in June, sliding 0.5%, and is now down 1% week to date, on pace to break a five-week win streak. Despite the recent dip, the S&P 500 still boasts a solid gain of nearly 4.5% for June and a remarkable 13.7% gain for the year.

Information technology and communication services, the two hottest sectors in the S&P 500 this year, took a break from their upward trajectory. Both sectors saw losses of about 1.4%, with Alphabet and Netflix dropping more than 2%. AMD slid 5.7%, and Intel shed 6%, exerting downward pressure on the tech sector.

The tech-heavy Nasdaq Composite suffered its worst daily performance since June 7, falling 1.2%. On the other hand, the Dow Jones Industrial Average slipped 0.3%.

Intel Plunges after Chip Update

Intel stock dropped 6% after the company provided an update on its turnaround plan to become a competitive chip manufacturing company. The company plans to change the way it reports its financial results. This means its foundry business, known as IFS, will have its own profit-and-loss statement. This new reporting structure aims to help control costs and achieve a cost reduction target of up to $10 billion over the next three years. Intel’s turnaround plan under CEO Pat Gelsinger relies on catching up with Taiwan Semiconductor Manufacturing Company’s manufacturing technology by 2026.

Powell Says More Rate Hikes Needed

Federal Reserve Chair Jerome Powell’s remarks indicating that more rate hikes are likely to combat inflation weighed on investor sentiment. Powell emphasized that lowering inflation still has a long way to go. He also suggested that further rate hikes may continue until the fall. The Fed recently decided to pause its rate-hiking campaign after 10 consecutive hikes but hinted at two more quarter-percentage point increases this year.

Financial Newsletter Writers are Bullish

In terms of investor sentiment, the latest weekly Investors Intelligence survey showed an increase in the percentage of bullish financial newsletter advisors and editors, reaching a fresh 19-month high at 54.3%. This rise in bullishness signals an increased risk in the market according to contrarian investors. Bearishness, on the other hand, decreased to the lowest level since January 2022. Only 20% of advisors are currently holding a bearish outlook.

More Powell, Weekly Jobless Claims on Tap

Investors will closely monitor Powell’s Semiannual Monetary Policy Report to the Senate Banking Committee on Thursday. They’re hoping for further insights on inflation and interest rates. Additionally, the weekly jobless claims data will be released, with economists polled by Dow Jones expecting a total of 256,000 claims.

Outlook:  Investors Hit the Brakes on Rally

In summary, US stock futures are flat as the tech-powered rally takes a pause. Recent declines and sector-specific losses suggest a temporary break in the market’s upward momentum. Meanwhile, Intel’s update on its turnaround plan and Powell’s comments on future rate hikes contribute to the cautious market sentiment. Investors will closely follow Powell’s report and jobless claims data to gain further insights into the market’s direction.