Dow, S&P Futures Rise Ahead of Earnings; Tariffs Eyed
The US stock market is set to open on a positive note, with Dow and S&P 500 futures rising over 0.35% ahead of key earnings releases from McDonald’s and Disney. However, strategists are warning that the ongoing trade tensions and Trump-era tariffs pose a significant risk to the market, particularly as it enters a seasonally weak phase.
As of early trading on Wednesday, Dow futures were up 0.38% and S&P 500 futures were up 0.35%. Nasdaq futures, on the other hand, lagged, rising only 0.2% amid pullbacks in AI stocks.
The upcoming earnings season is expected to be a crucial test for the market, with many major companies set to release their quarterly results over the next few weeks. McDonald’s, the world’s largest fast-food chain, is set to report its earnings on Wednesday, followed by Disney, the entertainment giant, on Thursday.
The market’s early gains can be attributed to a mix of factors, including a rebound in oil prices and a stronger-than-expected reading on the US services sector. The Institute for Supply Management’s (ISM) services index rose to 56.7% in March, beating expectations and signaling a strong pace of growth in the sector.
However, despite the positive start to the day, strategists are cautioning investors to remain cautious, citing the ongoing trade tensions and tariffs as the biggest risk to the market. The Trump administration’s tariffs on Chinese goods, which went into effect in September, have already had a significant impact on the global economy, and many are worried that they could continue to weigh on the market in the coming weeks.
“The biggest risk to the market is the tariffs, and it’s not just the impact on trade, it’s also the impact on sentiment,” said Michael Antonelli, market strategist at Robert W. Baird. “If we see a renewed escalation of tariffs, it could lead to a broader market pullback.”
Another major concern is the market’s seasonal weakness, which typically occurs in the spring and summer months. Historically, the S&P 500 has declined by an average of 1.5% between May and August, and many strategists are warning that this year could be no different.
Growth stocks, large caps, and financials are preferred by many strategists, who believe that these sectors are better equipped to navigate the current market environment. Cyclical stocks, on the other hand, are seen as more vulnerable to the ongoing trade tensions and tariffs.
In terms of specific stocks, McDonald’s is expected to report earnings of $1.64 per share, up from $1.52 per share a year ago. Disney is expected to report earnings of $1.33 per share, down from $1.48 per share a year ago.
Other earnings releases to watch include those from Coca-Cola, AT&T, and Verizon, which are set to report their quarterly results over the next few days.
In conclusion, while the market is set to open on a positive note, strategists are warning that the ongoing trade tensions and tariffs pose a significant risk to the market, particularly as it enters a seasonally weak phase. Growth, large caps, and financials are preferred, while cyclical stocks are seen as more vulnerable. As the market continues to navigate these uncertain times, investors would do well to remain cautious and focus on the fundamentals of individual stocks.
