Nasdaq, S&P 500 Futures Climb Cautiously As Wall Street Holds Breath For Key Inflation Data

Zinger Key Points
  • The equity market's strength this year has been accompanied by expanding valuations, says an analyst.
  • The higher market multiples are attributable to favorable liquidity conditions and an easing in inflation-adjusted interest rates, he says.

Wall Street displayed cautious optimism on Tuesday as traders awaited the crucial February consumer price inflation report. Lower-than-expected inflation could fuel hopes of the Fed implementing rate cuts this year, driving the current market rally. Conversely, a higher-than-expected figure could trigger a sell-off. Oracle Corp.’s ORCL positive earnings reaction could boost the tech sector.

Cues From Previous Session:

Monday’s session reflected nervousness about the upcoming inflation report and its impact on monetary policy. Major indices entered the session after experiencing losses for the week ending March 8th. Opening lower and falling further initially, the indices pared their losses throughout the day but closed mixed. The tech-heavy Nasdaq and broader S&P 500 closed lower, while the Dow Industrials managed a slight gain. Small-cap stocks underperformed larger counterparts, surrendering some recent gains.

Fund manager Louis Navellier said the market caution was due in part to the CPI and PPI data coming, “which may confirm that marching from 3% inflation to the Fed’s 2% target is likely to be challenging.”

Real estate, industrials, IT, consumer discretionary, communication services, and healthcare sectors closed in the red. Energy, materials, utilities, financials, and consumer staples gained ground.

IndexPerformance (+/-)Value
Nasdaq Composite-0.41%16,019.27
S&P 500 Index-0.11%5,117.94
Dow Industrials+0.12%38,769.66
Russell 2000-0.81%2,065.88

Analyst Color:

The fast start to the year bodes well for the remainder of the year, said Comerica Chief Investment Office John Lynch. He noted that the equity market’s strength this year has been accompanied by expanding valuations.

The higher market multiples, according to Lynch, are attributable to more favorable liquidity conditions and an easing in inflation-adjusted interest rates. 

“A strong start to the year usually bodes well for equity markets,” the analyst said. “A review of fast starts in both January and February since 1970 showed the S&P 500 Index tends to maintain strength over the remainder of that calendar year, as well as over the ensuing twelve months.”

That said, the analyst cautioned of volatility ahead. “While we would love to see gains of this magnitude going forward, it is important to assess recent gains within the context of market volatility during Presidential election years, which typically show weakness following primary season and heading into party conventions.”

Futures Today

Futures Performance On Tuesday ( as of 6:30 a.m. EDT)

FuturesPerformance (+/-)
Nasdaq 100+0.48%
S&P 500+0.30%

In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust SPY added 0.27% to $512.65 and the Invesco QQQ ETF QQQ climbed 0,46% to $439.39, according to Benzinga Pro data.

Upcoming Economic Data:

The Bureau of Labor Statistics is due to release the consumer price inflation report for February at 9:30 a.m. EDT. The February consumer price index may have increased 0.4% month-over-month, down from 0.3% in January, and 3.1% year-over-year, unchanged from the previous month.

The monthly and annual rates of core consumer price inflation are expected at 0.3% and 3.7%, respectively. In January, the rates were at 0.4% and 3.9%, respectively.

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

See Also: How To Trade Futures

Stocks In Focus:

  • Oracle rallied over 13% in premarket trading following its quarterly earnings announcement.
  • Other stocks moving on earnings were Asana, Inc. ASAN (down about 3%) and Vail Resorts, Inc. MTN (down over 5.50%).
  • Archer-Daniels-Midland Company ADM, International Game Technology PLC IGT and Kohl’s Corporation KSS are among the companies due to release their quarterly results before the market opens.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures advanced slightly, while the 10-year Treasury yield dipped. Gold prices retreated from record highs, and Bitcoin surged towards $72,000. Asian markets closed mostly higher, with the Hong Kong market leading the gains. European sentiment was cautiously positive ahead of the U.S. inflation data.

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