Nasdaq, S&P 500 Futures Rise Amid Tech Buoyancy, Bitcoin Gains 2%: Analyst Warns Of Elevated Valuations And Potential Election Volatility

Zinger Key Points
  • Financial sector is one that's worth keeping an eye on as it has been coming back to life, says an analyst.
  • Big banks, led by Citi, JPMorgan, Wells Fargo and Bank of New York Mellon, are lined up to release their Q2 results this week.

The market’s bullish bias will likely be put to the test on Wednesday as some key market-moving catalysts due this week could pose a threat to the upward momentum. Federal Reserve Chair Jerome Powell is scheduled to testify before the House Financial Committee and is widely expected to be in line with his comments from Tuesday. Traders may also bide time as the second-quarter earnings season kicks off with the big banks this week.

Early indications suggest tech stocks could extend their strength, potentially propping up the market that has been on an extended run. The results of the 10-year note auction could also impact sentiment. Some profit-taking cannot be ruled out ahead of Thursday’s consumer price inflation report.

FuturesPerformance (+/-)
Nasdaq 100+0.29%
S&P 500+0.16%

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY rose 0.17% to $556.76 and the Invesco QQQ ETF QQQ gained 0.29% to $499.23, according to Benzinga Pro data.

Cues From Last Session:

U.S. stocks closed Tuesday’s session on a mixed note as traders took stock of Powell’s rhetoric about inflation. Mega-cap stocks Nvidia Corp. NVDA and Tesla, Inc. TSLA came to the market’s rescue helping to overcome the fatigue that set in following the market’s record run. Some defensive sectors such as healthcare, real estate and utility stocks gained ground, and financial stocks rose solidly.

After a positive open, the Nasdaq Composite and the S&P 500 indices stayed mostly higher, although closing sharply off their early highs. Yet, these two averages set new intraday and closing records during the session. The underperformance of the Dow Jones Industrial Average continued as it languished in negative terrain but for some mid-session strength.

IndexPerformance (+/-)Value
Nasdaq Composite+0.14%18,429.29
S&P 500 Index+0.07%5,576.98
Dow Industrials-0.13%39,291.97
Russell 2000-0.45%2,029.47

Insights From Analysts:

The stock market could face difficulty sustaining the upward momentum seen in the first half of the year, said LPL Financial analysts in the firm’s mid-year outlook. The first-half outperformance, the firm said, is driven by anticipation of looser Fed policy and robust corporate earnings growth. “However, elevated valuations and potential volatility, especially with the upcoming U.S. presidential election, suggest a more cautious approach moving forward.”

Mark Newton, Global Head of Technical Strategy at Fundstrat, said the financial sector is worth keeping an eye on as it has been coming back to life. The strategist said the divergence between the large-cap tech and broader market and the economic weakness has been used as an excuse to bet on a market correction and/or underperformance. “There’s no saying that Tech HAS to peak out while others still languish,” he added.

“There’s obviously that “other” scenario, where the broader market comes back to life as rates fall.”

Upcoming Economic Data:
  • The Commerce Department is due to release its wholesale inventories report for May at 10 a.m. EDT. Economists, on average, expect a 0.6% month-over-month increase in wholesale inventories, faster than the 0.1% increase in April.
  • Powell will begin testifying before the House Financial Committee at 10 a.m. EDT.
  • The Energy Information Administration will release its weekly petroleum status report at 10:30 a.m. EDT.
  • The Treasury is set to auction 10-year notes at 1 p.m. EDT.
  • Chicago Fed President Austan Goolsbee and Fed Governor Michelle Bowman are scheduled to speak at a Fed event on childcare at 2:30 p.m. EDT.
  • Fed Governor Lisa Cook will make a public appearance at 7:30 p.m. EDT.

See Also: How to Trade Futures

Stocks In Focus:

  • Taiwan Semiconductor Manufacturing Co. Ltd. TSM climbed 2.40% in premarket trading after the foundry, which supplies chips to the likes of Nvidia, reported solid June quarter revenue.
  • Baidu, Inc. BIDU climbed over 3% on optimism over its robotaxi service.
  • Super Micro Computer, Inc. SMCI retreated over 1% amid a negative analyst action.
  • 10x Genomics, Inc. TXG plunged over 15% on an analyst downgrade.
  • Manchester United plc MANU is scheduled to release its earnings report ahead of the market open, while PriceSmart, Inc. PSMT and WD-40 Company WDFC are due after the close.

Commodities, Bonds And Global Equity Markets:

Crude oil futures are little changed with a negative bias after they declined for three straight sessions. While gold futures were rising for a second straight session. The benchmark 10-year Treasury note yield fell 2.7 points to 4.27%, while Bitcoin BTC/USD rallied more than 2% to above the $58.6K level.

The Asian market closed Wednesday’s session on a mixed note, with weaker Chinese consumer price inflation data weighing down on the Chinese and Hong Kong markets. The Japanese market, on the other hand, advanced and the Taiwanese market received support from a tech rally.

European stocks are recovering from the weakness seen in the aftermath of the regional election results.

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Posted In: EarningsEquitiesNewsFuturesPreviewsTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsMoversTrading IdeasAustan GoolsbeeJerome PowellLisa CookMark NewtonMichelle BowmanStories That MatterUS market preview
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