An inflation report that largely aligned with expectations and the 90-day extension to the U.S.-China trade truce catalyzed a strong rally on Tuesday.
Following the stock market’s record run, investor sentiment appears to have turned cautious, with major index futures trading lower early on Wednesday. Traders will likely look forward to speeches by Federal Reserve officials to gain further clarity on the rate outlook.
An adverse market reaction to earnings reported after Tuesday’s close, including those of CAVA Group (CAVA) and CoreWeave (CRWV), may also temper market optimism.
As of 1:50 a.m. ET on Wednesday, the Dow futures rose marginally, while the S&P 500 and Nasdaq 100 futures fell 0.41% and 0.08%.
An inflation report that largely aligned with expectations, along with a 90-day extension to the U.S.-China trade truce, catalyzed a strong rally on Tuesday. The major averages all opened higher and launched into a strong rally in early trading. Staying above the unchanged line throughout the session, the indices closed either at or just shy of their intraday highs.
In the process, the S&P 500, Nasdaq Composite, and Nasdaq 100 averages notched fresh records, with the broader gauge closing above the 6,400 psychological barrier for the first time ever. All 11 S&P 500 classes closed in the green, with communication services and IT stocks leading the way higher.
The Invesco QQQ Trust (QQQ), an exchange-traded fund (ETF) that tracks the Nasdaq 100 Index, ended down 0.30%, and the SPDR S&P 500 ETF (SPY) fell 0.20%. The SPDR Dow Jones Industrial Average ETF Trust (DIA) and iShares Russell 2000 ETF (IWM) declined 0.43% and 0.02%, respectively.
Commenting on the S&P 500’s record close, Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, said, “The markets are continuing to climb a wall of worry – about tariffs, inflation and higher valuations – but as long as the unemployment rate remains low and inflation isn’t high enough to deter the Fed, the bull market will continue.”
The strategist said the central bank looks primed to cut rates in September but pointed out that there is one more jobs report and one more inflation report to go before the next meeting.
“There is plenty of danger out there, but markets tend to overshoot to the upside, before eventually overshooting to the downside,” he added.
Comerica Chief Investment Officer Eric Teal said the prospect of rate cuts bodes well for many of the traditional value sectors and small-cap stocks. “These areas have lagged the technology and growth sectors and are primed to lead the market higher as breadth expands,” he added.
Among the economic catalysts for Wednesday are speeches by Richmond Fed President Tom Barkin (8 a.m. ET), Chicago Fed President Austan Goolsbee (2 p.m. ET) and Atlanta Fed President Raphael Bostic (12:30 p.m. ET).
Cisco Systems (CSCO), Brinker International (EAT), Performance Food Group (PFGC), and Stratasys (SSYS) are among the notable companies reporting earnings.
Crude oil futures rebounded early Wednesday, and gold futures flatlined around the $3,400 mark. The 10-year U.S. Treasury note, which pulled back below the 4.4% mark on Tuesday after the inflation print, eased marginally.
The U.S. dollar traded mixed against its major counterparts.
Most major Asian markets advanced, tracking the positive lead from Wall Street overnight. On the other hand, the Australian market retreated, dragged by declines in shares of banking stocks a day after the Reserve Bank of Australia cut its benchmark rates.
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