Nasdaq, S&P 500 Futures Drop As Tech Weakens, Meme Stock Rally Sputters: Analyst Sees Rate Cuts Hinging On Key Fed Data

Stocks are priming for a negative start on Tuesday after the major indices meandered to a mixed close in the previous session. Tech stocks were sliding premarket as reports suggested China is seriously contemplating cutting reliance completely on the United States in chipmaking, while meme stocks seemed to have lost their fizzle. Given the recent soft readings, traders may look to the factory goods orders and the JOLTS survey results. Bond yields continue to edge lower, baking in expectations of softer growth likely facilitating downward adjustments of the Fed funds rate.

Futures	Performance (+/-)
Nasdaq 100	-0.56%
S&P 500	-0.54%
Dow	-0.50%
R2K	-1.15%

Cues From Previous Session:

U.S. stocks closed Monday’s volatile session on a mixed note. After some weak economic data that pressured bond yields, a rally in tech stocks, and the meme stock frenzy gave the market an early lift, momentum faltered, pushing the major indices lower by the mid-session. The Nasdaq Composite and the S&P 500 Index recouped their losses and ended higher, with the former advancing moderately, while the latter rose much more modestly. The Dow Industrials languished mostly below the unchanged line before ending lower for the session.

The Institute for Supply Management’s May manufacturing purchasing managers index unexpectedly fell below the 50 mark, which delineates expansion and contraction and construction spending fell for a second straight month in April, underlining the shaky recovery in economic growth.

Index	Performance (+/-)	Value
Nasdaq Composite	+0.56%	16,828.67
S&P 500 Index	+0.11%	5,283.40
Dow Industrials	-0.30%	38,571.03
Russell 2000	-0.50%	2,059.68

Insights From Analysts:

Carson Group’s Ryan Detrick pointed out a historical pattern that bodes well for the near term. He noted that the market has been up double digits for the first five months of the year. So far, this year, the S&P 500 Index has gained 10.77%. This has occurred for the first time since 2021, he said.

“Pretty rare air, but rest of yr higher 84% of the time should have [bulls] smiling,” he said.

S&P 500 up double digits YTD after the first 5 months for the first time since 2021.

Pretty rare air, but rest of yr higher 84% of the time should have 🐂s smiling. pic.twitter.com/HnItmoXKWp

— Ryan Detrick, CMT (@RyanDetrick) June 3, 2024

Wharton professor Jeremy Siegel, Senior Economist to WisdomTree, in his weekly commentary, said as the June 11-12 Federal Open Market Committee meeting approaches, the focus will be on the updated Summary of Economic Projections and the dot-plot curve.

Siegel sees scope for inflation thawing amid the recent downturn in commodity prices and the likely softening in housing and shelter inflation. Despite recent reports pointing to a slowdown in growth, a recession is unlikely, although a slowdown could occur, he said. He also underlined the importance of Friday’s non-farm payrolls report. “This week’s employment report will be crucial. A very low number could prompt several interest rate cuts later this year if wages remain under control,” he said.

The shift toward value and small-cap stocks may not occur until there is certainty around Fed rate cuts, he added.

Upcoming Economic Data:

• The Commerce Department is scheduled to release its factory goods orders report for April at 10 a.m. EDT. Economists, on average, expect a 0.7% month-over-month increase, slower than the 1.6% growth in March.
• The Bureau of Labor Statistics will release the results of its April Job Openings And Labor Turnover survey, with the consensus calling for job openings at 8.4 million, down from 8.5 million in March.

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Stocks In Focus:

• GitLab Inc. GTLB fell over 3% in premarket trading following the company’s results announcement.
• Notable among the companies reporting after the market close are PVH Corp. PVH, Stitch Fix, Inc. SFIX, CrowdStrike Holdings, Inc. CRWD, and Hewlett Packard Enterprise Company HPE.

Commodities, Bonds And Global Equity Markets:

Crude oil futures fell sharply, extending their lean trot, and traded just under $73-a-barrel and gold futures also moved southward, with an ounce of the yellow metal trading around $2,350. The 10-year U.S. Treasury note yield fell 2.1 basis points to 4.381%, the lowest since mid-May. Bitcoin BTC/USD traded under the $68K level.

Asian stocks ended Tuesday’s session on a mixed note, with the Indian market plummeting amid profit-taking after Monday’s strong gains. The not-so-strong performance of the ruling party in the general election triggered the sell-off. While the Taiwanese, South Korean, and Australian markets also pulled back, the Chinese market advanced moderately.

The major European markets started on a markedly downbeat note on Tuesday as traders exercised restraint following recent gains and opted to move to the sidelines ahead of Thursday’s rate decision by the European Central Bank.

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