- US stock index futures trade in negative territory on Wednesday.
- US economic calendar will feature Q4 GDP revision.
- PCE inflation and Jobless Claims data will be released on Thursday.
S&P 500 futures fall 0.37%, Dow Jones futures drop 0.35%, and Nasdaq futures lose 0.46%.
S&P 500 (SPX), Dow Jones (DJIA), and Nasdaq (IXIC) indexes closed on Tuesday with a 0.17% gain, a 0.25% drop, and a 0.37% rise, respectively.
What to know before stock market opens
The Utilities Sector climbed 1.9% on Tuesday as the best-performing sector for the day, followed by the Communication Services Sector, which rose 1%. The Energy Sector recovered from daily lows but lost 0.43%.
Norwegian Cruise Line Holdings Ltd. (NCLH) and Carnival Corp. (CCL) were the biggest gainers for the day. NCLH rose 19.8%, while CCL added nearly 17%. Tuesday’s worst performer was the NASDAQ-listed Workday Inc. (WDAY), which backslid 4% to hit $295.05 at the closing bell.
Assessing the latest developments in financial markets, “among equities, there were some modest movements, with the S&P 500 (+0.17%) closing just below its all-time high, having basically been in a narrow band since the Nvidia results last week. Currently it’s down -0.21% for the week, meaning it still needs to recover a bit in order to achieve a joint record of 16 weekly advances in the last 18 (currently on 15/17 for first time since 1989),” said Jim Reid, global head of economics and thematic research at Deutsche Bank, and continued:
“Small-cap stocks continued to outperform, with the Russell 2000 up +1.34%, in contrast to the Dow Jones, which was down -0.25%. Tech stocks saw a marginal outperformance, with the NASDAQ up +0.37% and Magnificent 7 up +0.22%. It shows the signs of the times that Apple yesterday announced the closure of its electric car unit which it set up in 2014 that at one point promised autonomous driving within a reasonable timeframe. The fact that they did this partly to divert resources to AI shows how trends can change.”
Nasdaq FAQs
The Nasdaq is a stock exchange based in the US that started out life as an electronic stock quotation machine. At first, the Nasdaq only provided quotations for over-the-counter (OTC) stocks but later it became an exchange too. By 1991, the Nasdaq had grown to account for 46% of the entire US securities’ market. In 1998, it became the first stock exchange in the US to provide online trading. The Nasdaq also produces several indices, the most comprehensive of which is the Nasdaq Composite representing all 2,500-plus stocks on the Nasdaq, and the Nasdaq 100.
The Nasdaq 100 is a large-cap index made up of 100 non-financial companies from the Nasdaq stock exchange. Although it only includes a fraction of the thousands of stocks in the Nasdaq, it accounts for over 90% of the movement. The influence of each company on the index is market-cap weighted. The Nasdaq 100 includes companies with a significant focus on technology although it also encompasses companies from other industries and from outside the US. The average annual return of the Nasdaq 100 has been 17.23% since 1986.
There are a number of ways to trade the Nasdaq 100. Most retail brokers and spread betting platforms offer bets using Contracts for Difference (CFD). For longer-term investors, Exchange-Traded Funds (ETFs) trade like shares that mimic the movement of the index without the investor needing to buy all 100 constituent companies. An example ETF is the Invesco QQQ Trust (QQQ). Nasdaq 100 futures contracts allow traders to speculate on the future direction of the index. Options provide the right, but not the obligation, to buy or sell the Nasdaq 100 at a specific price (strike price) in the future.
Many different factors drive the Nasdaq 100 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the Nasdaq 100 as it affects the cost of credit, on which many corporations are heavily reliant. As such the level of inflation can be a major driver too as well as other metrics which impact on the decisions of the Fed.
Eyes on GDP revision ahead of PCE inflation report
The US Bureau of Economic Analysis will announce the second estimate of the Gross Domestic Product (GDP) growth for the fourth quarter on Wednesday. Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s (Fed) preferred gauge of inflation, figures will be scrutinized by market participants on Thursday.
The economic calendar will also feature on Thursday weekly Initial Jobless Claims for the week ending February 24, which is forecast to rise to 210,000 from 201,000 in the previous week.
The US Census Bureau reported on Wednesday that Durable Goods Orders declined by 6.1%, or $18 billion, to $276.7 billion in January. This reading followed the 0.3% decrease recorded in December and came in worse than the market expectation for a contraction of 4.5%.
New York Fed President John Williams is scheduled to speak later in the session. Williams said on Friday that he expects the US central bank to start lowering the policy rate in the second half of the year.
According to the CME FedWatch Tool, markets are nearly fully pricing in a no change in the Fed policy rate in March and see an 85% probability of another pause in May.
Salesforce Inc. (CRM), Snowflake Inc.(SNOW) and Monster Beverage Corp. (MNST) are among top companies that will release quarterly earnings reports after the closing bell on Wednesday.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022.
Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency.
When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
Source: https://www.fxstreet.com/news/stock-market-today-wall-street-set-to-open-lower-following-tuesdays-mixed-action-202402281113