Market Snapshot: U.S. stock futures point to cautious open after rally to three-month high

United States

U.S. stock futures are meandering around the flatline on Tuesday, holding near three-month highs following a summer surge.

How are stock-index futures trading
  • S&P 500 futures ES00, -0.19% dipped 2 points, or 0.1%, to 4296
  • Dow Jones Industrial Average futures YM00, -0.10% rose 17 points, or 0.1%, to 33890
  • Nasdaq 100 futures NQ00, -0.25% eased 15 points, or 0.1%, to 13666

On Monday, the Dow Jones Industrial Average DJIA, +0.45% rose 151 points, or 0.45%, to 33912, the S&P 500 SPX, +0.40% increased 17 points, or 0.4%, to 4297, and the Nasdaq Composite COMP, +0.62% gained 81 points, or 0.62%, to 13128. The Nasdaq Composite is up 23.3% from its mid-June low, but remains down 16.1% for the year-to-date.

What’s driving markets

Equity indices are in line for a slightly softer open, though bulls should not be too disheartened. It has been a feature of recent sessions, where in the early going stocks were struggling to hold their ground but eventually gave way to further gains as buyers took firm control.

Such underlying momentum has helped the S&P 500 climb 17.2% from its 2022 low touched in mid June, bolstered by hopes that a peak in inflation will allow the Federal Reserve to be less aggressive in hiking borrowing costs.

Poor economic data from China and a miserable survey of U.S. east coast manufacturing released at the start of the week may also provide the Fed with a reason to adopt a less hawkish stance.

Consequently, some of the current session’s caution may reflect wariness ahead of a further update on Fed thinking due Wednesday, when the central bank releases the minutes of its latest monetary policy meeting. The U.S. 10-year Treasury yield is TMUBMUSD10Y, 2.797% up 1.2 basis points to 2.799%.

“In the U.S. many investors are playing a waiting game, waiting to scour Fed minutes and also waiting for a whole host of retailers to deliver their updates giving us an inkling into where consumers are cutting back and which consumers are managing to tread the inflation heated waters,” said Danni Hewson, financial analyst, at AJ Bell.

Walmart WMT, +0.29% and Home Depot HD, -0.09% earnings are set for release before the opening bell rings on Tuesday.

“Walmart delivered the market equivalent of a boulder dropped into a puddle when it issued a second profit warning last month and investors are bracing themselves for more bad news,” said Hewson.

The big retailers reporting this week, which will include Target TGT, +0.53% and Lowe’s LOW, +0.76% on Wednesday, and Kohl’s KSS, -0.36% on Thursday, will bring the curtain down on the current reporting season, noted Richard Hunter, head of markets at Interactive Investor.

“For the most part, companies have emerged relatively unscathed from what was expected to be a difficult round of numbers, with outlook comments emanating from boardrooms showing caution rather than despair for the coming months,” said Hunter in a note to clients.

“It is possible that earnings may need to be revised given the current state of the economy for the third quarter, but for the moment corporate news has been relatively positive,” he added.

U.S. data due for release on Tuesday include July housing starts and permits at 8.30 a.m. Eastern and industrial production for July at 9.15 a.m. Eastern.

How are other assets faring
  • U.S. WTI oil futures CL.1, -0.51% were down 1.3% to $ 88.15 a barrel, adding to Monday’s sharp losses which followed news of a slowing Chinese economy.
  • The ICE Dollar index DXY, +0.23% rose 0.1% to 106.68, helping to push gold GC00, -0.36% down 0.5% to $ 1,789 an ounce.
  • Bitcoin BTCUSD, +0.04% fell 0.2% to $ 24,020.
  • Asia markets were mildly mixed and in Europe the Stoxx 600 SXXP, +0.27% added 0.3% following Wall Street’s late move to fresh highs.