Dow, S&P Futures Rise Ahead of Earnings; Tariffs Eyed
US stock futures rose early Wednesday, with the Dow and S&P 500 pointing to gains of over 0.35% ahead of key earnings reports from McDonald’s and Disney. As markets enter a seasonally weak phase, strategists warned that Trump-era tariffs pose the biggest risk to investors. Meanwhile, growth, large caps, and financials are preferred sectors, while the Nasdaq futures lagged, rising just 0.2% amid AI stock pullbacks.
The Dow Jones Industrial Average futures climbed 143 points, or 0.46%, to 26,420, while the S&P 500 futures rose 13.5 points, or 0.46%, to 2,893. The Nasdaq futures, however, inched up 18 points, or 0.23%, to 7,571.
The modest gains come as investors await the earnings reports from two of the world’s largest companies. McDonald’s is set to release its quarterly results after the market closes, while Disney will report its earnings on Thursday morning.
Despite the positive start to the day, strategists caution that the market is entering a seasonally weak period. The S&P 500 has historically averaged losses of around 1.5% in the month of May, according to data from LPL Financial. Additionally, the yield curve has inverted, a potential harbinger of a recession.
“The biggest risk right now is the tariffs,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “The tariffs are a big unknown, and they could have a huge impact on the market.”
Cardillo noted that the market is largely ignoring the trade tensions, instead focusing on the Federal Reserve’s accommodative monetary policy and the robust state of the US economy.
However, not all strategists are as sanguine about the market’s prospects. “We’re entering a seasonally weak period, and the market is vulnerable to a pullback,” said David Lefkowitz, senior equity strategist at UBS Financial Services. “The tariffs are a major concern, and we could see a significant impact on the market if they aren’t resolved.”
Preferred sectors for investors include growth, large caps, and financials, which are seen as benefiting from the current economic environment. “Growth stocks are a good bet right now, as they’re less affected by tariffs and more focused on the domestic economy,” said Lefkowitz.
Large caps, such as the Dow components, are also seen as a safe haven, as they’re less volatile and offer a stable return. Financials, including banks and insurance companies, are also expected to perform well, as they benefit from a strong economy and low interest rates.
In contrast, the Nasdaq futures were dragged down by AI stocks, which have been hit hard in recent weeks due to concerns over the impact of tariffs on the technology sector. AI stocks, such as Nvidia and Advanced Micro Devices, have been among the worst performers in the market this year.
In conclusion, while the market is showing signs of strength ahead of the earnings reports from McDonald’s and Disney, strategists warn that the Trump-era tariffs pose a significant risk to investors. Growth, large caps, and financials are preferred sectors, while AI stocks are seen as vulnerable to further declines. As the market enters a seasonally weak period, investors would do well to remain cautious and focus on the fundamentals.
