Dow, S&P Futures Rise Ahead of Earnings; Tariffs Eyed
As the US stock market prepares for a busy week of earnings reports, futures for the Dow Jones Industrial Average and the S&P 500 index rose sharply early Wednesday morning. The gains came ahead of key earnings releases from McDonald’s and Disney, two of the most widely followed companies in the world.
At 6:30 am ET, Dow futures were up 0.35%, while S&P 500 futures rose 0.37%. Nasdaq futures, however, lagged behind, gaining only 0.2% amid a pullback in AI stocks.
The early gains were driven by a combination of factors, including a more optimistic tone from the Federal Reserve and a rebound in global markets. The Fed’s decision to keep interest rates unchanged last week, combined with its indication that it may not raise rates again this year, has helped to boost investor sentiment.
“Markets are looking ahead to earnings, and the fact that the Fed is taking a more dovish stance has helped to alleviate some concerns about rate hikes,” said David Carter, chief investment strategist at Fundstrat Global Advisors. “We’re also seeing some rotation out of the tech sector and into other areas of the market, such as financials and large-cap stocks.”
Financials, which have been a bright spot in the market in recent weeks, led the gains in the pre-market session. JPMorgan Chase, Wells Fargo, and Bank of America were all up more than 1% ahead of their earnings reports.
Large-cap stocks also rose, with the S&P 500’s value-weighted index gaining 0.45%. This is in contrast to the growth-heavy Nasdaq, which has been struggling in recent weeks.
One area of concern for investors is the looming threat of tariffs. The Trump administration has imposed tariffs on billions of dollars’ worth of goods from China, and the US and China are currently engaged in a trade war.
“Tariffs are the biggest risk facing the market right now,” said Carter. “The uncertainty surrounding trade is making it difficult for companies to make long-term plans, and it’s also weighing on consumer confidence.”
The trade war has already had a significant impact on the US economy, with the IMF estimating that it will reduce global economic growth by 0.5 percentage points in 2020. The impact on the stock market has been significant, with the S&P 500 falling more than 1% in the past week.
As the market enters its typically weak phase of the year, strategists are urging investors to focus on growth, large-cap, and financial stocks. These areas of the market tend to perform well in the second half of the year, and they offer a degree of stability and predictability that is hard to find in other areas.
“That’s not to say that growth stocks won’t have their day,” said Carter. “But in general, we’re seeing a rotation out of high-flying growth stocks and into more stable areas of the market.”
In addition to McDonald’s and Disney, investors will also be keeping a close eye on earnings reports from Coca-Cola, Intel, and Procter & Gamble this week. These companies are expected to provide insights into consumer spending and the overall state of the economy.
Overall, the market is poised for a busy week of earnings reports, and investors will be closely watching the releases from some of the most widely followed companies in the world. As the market navigates the uncertainty surrounding tariffs and trade, it’s likely that growth, large-cap, and financial stocks will continue to be favored.
