Nasdaq, S&P 500 Futures Stall As Rate Worries Dampen Earnings Cheer: Why This Analyst Isn't Worried 'Too Much' About Short-Term Risks

U.S. stock futures remain narrowly mixed ahead of the market open on Wednesday as early indicators suggest a lack of direction. While most earnings reports have been positive, there have been some disappointments too. The focus once again shifts to speeches by Federal Reserve officials, as traders seek clarity on the potential schedule for rate cuts. Additionally, market participants will be monitoring the 10-year note auction and the Congressional Budget Office‘s briefing on the economic outlook.

Cues From Tuesday’s Trading

U.S. stocks closed Tuesday’s session with modest gains amid ongoing earnings releases. However, uncertainty persisted regarding potential rate cuts, with comments from Federal Reserve officials offering mixed signals. While Minneapolis Fed President Neel Kashkari suggested continued vigilance on inflation, Cleveland Fed President Loretta Mester hinted at possible rate cuts if economic conditions align with expectations. Despite opening higher, stocks relinquished early gains before staging a late-session rally. The S&P 500 Index and the Dow Industrials ended below their previous all-time highs, with IT and communication services facing selling pressure while material, healthcare, and real estate sectors outperformed.

US Index Performance On Tuesday

Analyst Color:

Even as the economy remains strong and earnings exceed expectations, an analyst warned of looming risks in the near term. Commonwealth Financial Network Chief Investment Officer Brad McMillan said stock prices could be cushioned by earnings growth outperforming expectations.

“While interest rates and valuations could be a challenge, the strong economy and earnings growth will potentially more than offset that,” he said.

The key issues, the analyst said, will be “how fast the economy grows and what that means for inflation.” “Market expectations on rates have changed rapidly but are now more aligned with reality, so the effects of the Fed are likely to be less negative going forward,” he said.

“While the trends remain positive, risks could increase over the next couple of months,” McMillan said, adding “This is something to watch out for but not worry about too much, given the strong economic fundamentals.”

Futures Today

Futures Performance On Wednesday

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY edged down 0.02% to $493.90 and the Invesco QQQ ETF QQQ gained 0.13% to $428.13, according to Benzinga Pro data.

Upcoming Economic Data:

The Commerce Department will release its trade balance report for December at 8:30 a.m. ET. Economists, on average, expect the trade deficit to narrow from $63.2 billion in November to $62 billion in December.

The Energy Information Administration is scheduled to release its customary weekly petroleum status report at 10:30 a.m. ET.

Fed speeches scheduled for the day are

• Fed Governor Adriana Kugler: 11 p.m. ET
• Boston Fed President Susan Collins: 11:30 a.m. ET
• Richmond Fed President Thomas Barkin: 12:30 a.m. ET
• Fed Governor Michelle Bowman: 2 p.m. ET

The Treasury will auction 10-year notes at 1 p.m. ET.

The Federal Reserve is due to release its report on outstanding consumer credit at 3 p.m. The consensus estimate calls for a reduction in outstanding consumer credit from $23.7 billion in December to $15 billion in January.

The CBO will provide a briefing on the budget and economic outlook at 3 p.m. ET.

See also: Futures Vs. Options

Stocks In Focus:

• Chipotle Mexican Grill, Inc. CMG, rose over 2.50% in premarket trading following the release of its quarterly results.
• Among the other stocks moving on earnings are Ford Motor Co. F (up about 6%), Cirrus Logic, Inc. CRUS (up over 8%), Yum China Holdings, Inc. YUMC (up about 15%), Enphase Energy, Inc. ENPH (up over 15%), Snap Inc. SNAP (down over 31%) and MicroStrategy Incorporated MSTR (down about 1.5%).
• Alibaba Group Holding Limited BABA, CVS Health Corporation CVS, Fox Corporation FOX, Roblox Corporation RBLX, Yum! Brands, Inc. YUM and The New York Times Company NYT are among the companies due to report their quarterly results ahead of the market open.
• Chief among those reporting after the close are The Allstate Corporation ALL, GoPro, Inc. GPRO, Mattel, Inc. MAT, News Corporation NWS, O’Reilly Automotive, Inc. ORLY, PayPal Holdings, Inc. PYPL, Walt Disney Co. DIS, and Wynn Resorts Limited WYNN.
• New York Community Bancorp, Inc. NYCB extended its slide amid rising fears over governance issues.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures rose 1.01% to $74.05 in early European session on Wednesday, adding to the 0.73% gain in the previous session. The benchmark 10-year Treasury note rose 0.031 percentage points to 4.123% on Wednesday.

Asian stocks ended mixed yet again on Wednesday, with Chinese, Taiwanese and Singaporean markets advancing strongly, while Japanese, Hong Kong and Indonesian markets settled lower. The Chinese optimism is premised on the government and authorities handholding the market with support measures.

European stocks were lower by late-morning trading on Wednesday, with the Euro Stoxx 50 down 0.12%. Traders took cues from a slew of domestic earnings and contemplated the outlook for interest rates.

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This illustration was generated using artificial intelligence via MidJourney.