A strategist said he favors growth over value, large caps over small caps, and the communication services and financials sectors as the market navigates through tariff headwinds.
U.S. stock futures signaled a rebound in Wall Street on Wednesday following the previous session’s lackluster performance. That said, adverse reactions to earnings from artificial-intelligence (AI) plays AMD (AMD) and Super Micro Computer (AI) and negative tariff headlines could temper the market mood.
As of 1:50 a.m. on Wednesday, the Dow and S&P 500 futures rose by over 0.35%, while the Russell 2000 futures climbed by more than 0.80%. In contrast, Nasdaq futures increased by a more modest 0.20%.
Stocks went about in a lackluster fashion on Tuesday and closed lower for the session after the Institute for Supply Management’s service sector survey showed a slowdown in activity, accompanied by a rise in pricing pressure and labor market.
IT, utility, and communication services stocks fell by the most, while the strength in material stocks provided an offsetting impact.
The Invesco QQQ Trust (QQQ), an exchange-traded fund (ETF) that tracks the Nasdaq 100 Index, fell 0.68% despite Palantir’s (PLTR) rally, and the SPDR S&P 500 ETF (SPY) moved down 0.51%. The SPDR Dow Jones Industrial Average ETF Trust (DIA) slipped 0.15%, while the iShares Russell 2000 ETF (IWM) climbed 0.51%.
On the economic front. Federal Reserve Governor Lisa Cook and Boston Fed President Lisa Cook are due to participate in a panel discussion at 2 p.m. ET.
Traders may also stay tuned to the earnings reports from Walt Disney (DIS), McDonald’s (MCD), Carlyle Group (CG), Avnet (AVT), Choice Hotels (CHH), Global Payments (GPN), Louisiana-Pacific (LPX), Novavax (NVAX), Unity Software (U), Shopify (SHOP), Airbnb (ABNB), AIG (AIG), DraftKings (DKNG), DoorDash (DASH), e.l.f. Beauty (ELF), Lyft (LYFT), Uber (UBER), and Sunrun (RUN).
LPL Financial Chief Equity Strategist Jeff Buchbinder said, “Investors may be well served by bracing for occasional bouts of volatility given how much optimism is currently reflected in equity prices.”
While stating that the tariff effects will be temporary, Buchbinder did not rule out some upward pressure on inflation and a drag on profit margins. The strategist believes this will be the market’s biggest test over the seasonally weak period for the stock market over August and September.
The strategist said he favors growth over value, large caps over small caps, and the communication services and financials sectors.
Crude oil futures climbed in the Asian session, while gold futures fell modestly. The 10-year Treasury note yield bounced back above 4.20% after breaking below the level in Tuesday’s session. The dollar is weaker across the board.
Asian stocks were mixed as traders weighed the looming risk of Trump tariffs, which are set to take effect on Thursday.
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