Dow, S&P Futures Rise Ahead of Earnings; Tariffs Eyed
US stock futures rose early Wednesday, with the Dow and S&P 500 indices up over 0.35% ahead of key earnings reports from McDonald’s and Disney. As the market enters a seasonally weak phase, strategists warned that the biggest risk lies in the Trump-era tariffs, which could have a significant impact on investor sentiment.
The Dow Jones Industrial Average futures rose 135 points, or 0.43%, to 26,395, while the S&P 500 futures climbed 15 points, or 0.35%, to 2,932. The Nasdaq futures, however, lagged behind, rising just 0.2% amid pullbacks in AI stocks.
The earnings season is expected to be a crucial test for the market, with investors keenly awaiting reports from major companies. McDonald’s, the world’s largest fast-food chain, is set to report its quarterly earnings on Wednesday, followed by Disney’s report on Thursday.
“The earnings season is going to be a big driver of the market’s direction,” said Michael Antonelli, equity strategist at Robert W. Baird. “If companies can deliver on their expectations, it could help alleviate some of the concerns around the global economy.”
However, strategists are also warning that the Trump-era tariffs pose a significant risk to the market. The tariffs, which were imposed on a range of Chinese goods in 2018, have had a significant impact on global trade and could continue to weigh on investor sentiment.
“The tariffs are still a major overhang on the market,” said David Kostin, chief US equity strategist at Goldman Sachs. “Until we see some resolution on the trade front, it’s going to be difficult for the market to make meaningful progress.”
Growth, large caps, and financials are the preferred sectors for investors, according to Kostin. He noted that these sectors are less exposed to the tariffs and have a stronger track record of delivering earnings growth.
Growth stocks, which have been a key driver of the market’s gains in recent years, are expected to continue to outperform in the coming months. According to data from FactSet, the S&P 500 growth index has outperformed the value index by nearly 20% over the past 12 months.
Large-cap stocks, which have a stronger track record of delivering earnings growth, are also expected to perform well. According to data from S&P Dow Jones Indices, the S&P 500 large-cap index has outperformed the small-cap index by nearly 15% over the past 12 months.
Financials, which have been a key driver of the market’s gains in recent years, are also expected to perform well. According to data from FactSet, the S&P 500 financials index has outperformed the broader market by nearly 10% over the past 12 months.
In addition to earnings, investors will also be paying close attention to the latest economic data. The US economy is expected to have grown at a pace of around 2% in the second quarter, according to forecasts from economists at Bloomberg.
The Federal Reserve is also expected to cut interest rates for the third time this year at its meeting next week. According to data from the CME Group, the probability of a rate cut next week stands at around 90%.
In conclusion, while the market is expected to be volatile in the coming weeks, strategists are warning that the Trump-era tariffs pose the biggest risk to investor sentiment. Growth, large caps, and financials are the preferred sectors for investors, and earnings from major companies such as McDonald’s and Disney will be closely watched.
