NASDAQ 100, Dow Jones, S&P 500: Futures Lower as Positive Momentum Falters

Highlights

• US stock futures struggle to sustain positive momentum after the Juneteenth holiday.
• S&P 500 and Nasdaq Composite achieve notable weekly gains, marking positive streaks.
• UBS highlights three key factors for investors: Fed rate hikes, US recession avoidance, and AI stocks’ performance.

Overview

The major US stock index futures faced downward pressure on Tuesday.  Traders are so-far struggling to sustain the positive momentum from the previous week. Following the Juneteenth holiday closure on Monday, investors were hoping to build on last week’s strong performance.

Last week, both the S&P 500 and the Nasdaq Composite delivered their best weekly performances since March. The broad-market benchmark saw a rise of 2.6%, while the tech-heavy index added an impressive 3.25%. Additionally, the S&P 500 achieved its fifth consecutive positive week, a milestone last seen in November 2021, while the Nasdaq marked its eighth consecutive positive week, a feat previously achieved in 2019.

At 09:38 GMT, Dow futures are trading 34463.00, down 141.00 or -0.41%. S&P 500 futures are at 4432.75, down 20.75 or -0.47% and Nasdaq Composite futures are trading 15174.75, down 93.25 or -0.60%.

Investor Sentiment Positive

Investor sentiment was generally positive in response to the Federal Reserve’s decision to forgo a rate hike in June. Federal Reserve Chairman Jerome Powell stated during a press conference that the central bank is yet to finalize its policy ahead of the July meeting, although two more quarter-point rate increases are forecasted later this year. The decision to skip the June rate hike broke the streak of ten consecutive interest rate increases by the Fed

New Worries Over Limited Economic Data

While Powell emphasized the data-dependent nature of future Fed policy, stocks have been on an upward trend. However, investors are now evaluating market sentiment in a shortened trading week with limited economic data. The release of housing starts data is expected on Tuesday morning.

Fed Speakers On-tap Including Chair Powell

UBS Identifies Keys to Sustaining Rally

To sustain the current market rally, UBS highlights three key points that investors need to consider. Firstly, they must believe that the Federal Reserve will not raise interest rates beyond the two increases implied by the latest dot plot. Secondly, investors need to maintain confidence in the US economy’s ability to avoid a recession. Finally, the performance of artificial intelligence stocks, which have contributed significantly to the S&P 500’s climb in 2023, needs to justify its upward trajectory.

FedEx Reports after Closing Bell

In terms of earnings, investors will be closely watching for the quarterly report from shipping giant FedEx, scheduled to be released after the closing bell on Tuesday.

Short-Term Outlook:  Crucial Period for Momentum

The financial markets are navigating a crucial period as investors assess the continuation of positive momentum, upcoming central bank decisions, and the performance of key sectors such as artificial intelligence.