US Stocks May Have A Slow Start As Trump's Tariff Threat Begins To Thwart Relief Rally: Analysts Remain Optimistic About AI-Linked Sectors Stocks

U.S. stocks could open on a sluggish note on Tuesday after ending in green on Monday as President-elect Donald Trump threatened to hit two of U.S.’s largest trading partners – Canada and Mexico – with tariffs.

The Dollar Index strengthened and was hovering around the 107 level. Expectations of a further 25 basis point rate cut in December have fallen to just 59% now, down from 75% a month ago, according to CME Group's FedWatch tool.

Futures	Performance (+/-)
Nasdaq 100	0.08%
S&P 500	0.09%
Dow Jones	0.07%
R2K	-0.26%

In premarket trading on Monday, the SPDR S&P 500 ETF Trust SPY was up 0.06% to $597.87 and the Invesco QQQ ETF QQQ rose 0.04% to $506.80, according to Benzinga Pro data.

Cues From The Last Session

The Dow Jones closed higher by around 440 points to 44,736.57 on Monday. The S&P 500 rose 0.30% to 5,987.37, while the Nasdaq Composite rose 0.27% to close at 19,054.84 during Monday’s session.

On the economic data front, the Chicago Fed National Activity Index fell to -0.40 in October compared to -0.27 in the previous month and versus market estimates of -0.20.

The Dallas Fed’s Texas manufacturing activity index rose to -2.7 in November compared to a reading of -3 in the previous month and versus market estimates of -2.4.

Most sectors on the S&P 500 closed on a positive note, with real estate, materials, and consumer discretionary stocks recording the biggest gains on Monday.

However, energy and information technology stocks bucked the overall market trend, closing the session lower.

Index	Performance (+/-)	Value
Nasdaq Composite	0.27%	19,054.84
S&P 500	0.30%	5,987.37
Dow Jones	0.99%	44,736.57
Russell 2000	1.47%	2,442.03

Insights From Analysts:

“Equity markets continue to display remarkable strength. The S&P 500 and other major indices are flirting with or surpassing all-time highs. The breadth of the rally is particularly noteworthy, with a growing number of stocks hitting 52-week highs,” said Jeremy Siegel, a senior economist at WisdomTree.

“This breadth is a key signal of market health, as it indicates a robust and inclusive rally rather than one concentrated in a few mega-cap names,” he added.

Analysts at BlackRock said that they are positive about the AI theme in the technology sector. “Valuations for AI beneficiaries are supported as tech companies keep beating high earnings expectations. We think upbeat sentiment can broaden out,” their note said.

BlackRock also added that they see the AI buildout and adoption creating opportunities across sectors. “We get selective, moving toward beneficiaries outside the tech sector. Broad-based earnings growth and a quality tilt make us overweight U.S. stocks overall.”

Predicting how December could look like for the stock markets, Ryan Detrick, chief market strategist at Carson Group, highlighted how markets have performed better than average in December in every election year since 1950.

No month is more likely to be higher than December in an election year (83.3%). pic.twitter.com/WrOI59tUiR

— Ryan Detrick, CMT (@RyanDetrick) November 25, 2024

Upcoming Economic Data:

This week’s economic calendar is not as packed as last week’s due to Thanksgiving. Here are the key events lined up for Tuesday:

• The S&P Case-Shiller home price index for 20 cities will be released at 9 a.m. ET.
• Data on consumer confidence and new home sales will be released at 10 a.m. ET.
• The minutes of the Fed's November FOMC meeting will be released at 2 p.m. ET.

Stocks In Focus:

• Woodward Inc. WWD is up by almost 11% in premarket trading after Pathstone Holdings LLC boosted its position by 28.6% during the 3rd quarter, as per SEC filing. The company also reported a record revenue of $3 billion in the September quarter, aided by the performance in both aerospace and industrial segments.
• Rivian Automotive Inc. RIVN rose 6% in premarket as it reacted to reports that Tesla Inc TSLA reached a "conditional" settlement concerning a 2020 lawsuit. The Elon Musk-led company had accused Rivian of poaching Tesla employees to get ahold of its EV trade secrets.
• Exact Sciences Corp. EXAS was trading above 5.5% in premarket after the company advanced breast cancer care with the Oncotype DX test and genomic profiling research at the San Antonio Breast Cancer Symposium 2024.
• Semtech Corp. SMTC was up over 19% in premarket hours after the chipmaker reported a strong set of earnings. The company posted revenue of $236.8 million for the quarter with quarterly earnings of $0.26 per share as compared to $0.02 per share a year ago.
• Blue Bird Corp. BLBD was down over 10% in premarket after its fourth-quarter earnings missed analyst estimates. The quarterly earnings of $0.77 per share missed the Zacks Consensus Estimate of $0.78 per share. This compares to the EPS of $0.66 in Q4 of the previous fiscal.
• Investors are awaiting earnings results from Best Buy Co., Inc. BBY, HP Inc. HPQ, and Dell Technologies Inc. DELL today.

Commodities, Bonds And Global Equity Markets:

Crude oil futures rose in the early New York session, advancing 0.93% to hover around $69.57.

The 10-year Treasury note yield eased to 4.293%.

Major Asian markets ended lower on Tuesday, except for Hong Kong’s Hang Seng Index. European markets were also down in early trading.

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Photo courtesy: Wikimedia