U.S. stock futures were slightly lower on Tuesday after ending largely flat on Monday. Futures of major benchmark indices were trading lower in premarket.

Meanwhile, the 10-year Treasury bond yielded 4.45% and the two-year bond was at 3.96%. The CME Group's FedWatch tool‘s projections show markets pricing a 91.4% likelihood of the Federal Reserve keeping the current interest rates unchanged in its June meeting.

Cues From Last Session:

Healthcare, consumer staples, and industrials led the S&P 500’s Monday gains as U.S. stocks mostly climbed, with the Dow Jones adding over 100 points.

However, energy and consumer discretionary stocks bucked the upward trend, closing lower.

This positive momentum followed a strong prior week where the S&P 500 rose 5.3%, the Dow increased 3.4%, and the Nasdaq Composite surged 7.2%.

Despite Moody’s downgrading U.S. sovereign credit from Aaa to Aa1, investors showed limited concern. Notably, UnitedHealth Group Inc. (NYSE:UNH) shares jumped over 8% on Monday, extending Friday’s 6% surge, after executives purchased shares during a recent dip.

Novavax Inc. (NASDAQ:NVAX) also soared 15% following FDA approval for its Nuvaxovid COVID-19 vaccine for high-risk individuals.

On the economic front, the CB Leading Index saw a 1% monthly decline in April.

Insights From Analysts:

As the S&P 500 index recovered and it was just 2.99% lower than its all-time high of 6,147.43 points, Subu Trade shares data in an X post suggesting that the index tends to rally for 2-12 months after notching such “quick recoveries.”

Last time the S&P 500 recovered from -18% to -3% within 50 days, it returned 20.43% on average after one year and 4.86% after three months.

Also, the data shows that the index was higher than 100% of the time after nine months and a year.

“These quick recoveries tend to see stocks rally more over the next 3-12 months. Momentum is strong,” the X post stated.

Meanwhile, analysts at BlackRock bet on rising inflation by being "overweight" on the inflation-linked bonds.

This strategic shift is to mitigate risks stemming from "persistent inflation pressure" and growing concerns over the sustainability of U.S. government finances.

The note also highlighted how the U.S. debt sustainability relies on large and steady funding by foreign investors.

"The downgrade reinforces the U.S. fiscal sustainability challenge that we've long flagged, especially persistent U.S. budget deficits at a time when higher interest rates are boosting debt servicing costs. If these dynamics dent the confidence of foreign bond holders, rising term premium could push up bond yields and debt servicing costs even more," explained BlackRock in its note.

As a result, BlackRock’s current strategy now anticipates higher term premiums for U.S. Treasuries and ongoing inflation.

"That’s why our starting point also includes our expectation of rising term premium for U.S. Treasuries and persistent inflation pressure. We go overweight inflation-linked bonds and neutral global investment grade credit given wider spreads," the note stated.

Even though U.S. assets are still core to their portfolios, BlackRock’s shift into inflation-linked bonds highlights their proactive approach to counter looming fiscal and inflationary challenges.

See Also: How to Trade Futures

Upcoming Economic Data

Here’s what investors will keep an eye on Tuesday:

• Richmond Fed President Tom Barkin will speak at 9:00 a.m. ET.
• Boston Fed President Susan Collins will participate in the ‘Fed Listens’ event at 9:30 a.m. ET.
• St. Louis Fed President Alberto Musalem will speak at 1:00 p.m., and Federal Reserve Governor Adriana Kugler will speak at 5:00 p.m. ET.

Stocks In Focus:

Commodities, Gold, And Global Equity Markets:

Crude oil futures were trading lower in the early New York session by 0.19% to hover around $62.02 per barrel.

Gold Spot US Dollar rose 0.24% to hover around $3,238.07 per ounce. Its last record high stood at $3,500.33 per ounce. The U.S. Dollar Index spot was lower by 0.22% at the 100.2010 level.

Asian markets ended higher on Tuesday except South Korea's Kospi and India's S&P BSE Sensex index. Australia's ASX 200, Japan's Nikkei 225, Hong Kong's Hang Seng, and China’s CSI 300 indices advanced. European markets were higher in early trade.

Read Next:

• Federal Reserve Should Do ‘Nothing At All’ About The Rising Yields, Says Craig Shapiro: ‘Let The Bond Vigilantes Eat’
  

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