U.S. stock index futures experienced a slight decline in evening deals on Tuesday, with heavyweight technology stocks continuing to see a pullback ahead of crucial earnings reports from the sector later this week. Despite strong earnings reports, increased optimism about the U.S. economy, and growing bets on lower interest rates, traders have been moving away from tech stocks and into sectors more sensitive to economic shifts.
As of 19:37 ET (23:37 GMT), S&P 500 Futures fell 0.1% to 5,713.25 points, and Nasdaq 100 Futures dropped 0.2% to 20,567.50 points. In contrast, Dow Jones Futures rose slightly to 41,266.0 points.
The upcoming 2024 presidential race has also been a significant focus, especially after an attempt on Donald Trump’s life over the weekend.
ASML and TSMC Earnings on the Horizon
Key earnings reports this week include those from Dutch lithography equipment maker ASML Holding NV (NASDAQ:ASML) and Taiwanese contract chipmaker TSMC (NYSE:TSM), scheduled for Wednesday and Thursday, respectively. These companies are vital indicators for the chipmaking industry, and their earnings reports are expected to provide further insights into demand, particularly from the artificial intelligence sector.
Impact of AI Hype and Sector Rotation
The hype over AI has been a significant driver of Wall Street’s rally over the past year, with tech stocks like NVIDIA Corporation (NASDAQ:NVDA) leading to substantial valuation increases. However, this rally has cooled in recent sessions as traders await upcoming earnings reports for more trade signals. The tech sector has also felt pressure as traders have taken profits and shifted investments into more economically sensitive areas.
Dow Jones Leads on Strong Earnings and Rate Cut Hopes
The Dow Jones Industrial Average outperformed other indices recently, surging 1.9% to a record closing high of 40,954.48 points on Tuesday. The S&P 500 also saw gains, rising 0.6% to a record high of 5,666.98 points, while the tech-heavy Nasdaq Composite lagged, increasing only 0.2% to 18,510.86 points. The strength in the Dow was driven by robust earnings from major banks and insurers.
The earnings season is set to continue with reports from companies such as Johnson & Johnson (NYSE:JNJ), U.S. Bancorp (NYSE:USB), United Airlines Holdings Inc. (NASDAQ:UAL), Equifax Inc. (NYSE:EFX), and Prologis Inc. (NYSE:PLD).
Optimism Over Interest Rate Cuts
Optimism surrounding potential interest rate cuts has also supported U.S. stocks. Soft inflation readings and dovish comments from the Federal Reserve have increased bets that the central bank will begin cutting rates as early as September. Traders are pricing in a 91.7% chance of a 25 basis point cut in September, with a smaller possibility of a 50 basis point cut, according to CME Fedwatch. Even stronger-than-expected retail sales data did little to dampen these expectations.
This dynamic market environment continues to unfold as traders navigate earnings reports, economic data, and potential shifts in monetary policy, keeping a close eye on both short-term movements and long-term trends.