Stock futures show minimal movement as tech slump impacts markets: Live updates
Traders at the New York Stock Exchange are observing little change in stock futures on Monday evening. This comes after tech losses pulled the broader market downward, with investors eagerly awaiting Nvidia's earnings report and delayed jobs data for the week ahead.
Futures tied to the Dow Jones Industrial Average rose by a modest 0.1%, while S&P futures and Nasdaq 100 futures also saw slight gains of less than 0.1%. In contrast, the previous trading session saw the three major U.S. indexes close in the red, with the Dow Jones Industrial Average plunging over 550 points, or 1.2%, and the S&P 500 and Nasdaq Composite each losing around 0.9%.
Nvidia, a key player in the chip industry, is set to report its third-quarter results after the market close on Wednesday. The company's performance has sparked debates about the strength of the AI-driven market rally this year. Concerns have been raised regarding weak market breadth, high tech valuations, and the stability of AI fundamentals, exacerbated by a surge in Big Tech debt offerings and the rapid depreciation of AI chips.
The tech-heavy Nasdaq is on the brink of ending its seven-month winning streak, while the S&P 500 has seen a 2.5% decline in November, reversing its six-month upward trend. Garrett Melson, a portfolio strategist at Natixis Investment Managers Solutions, notes a dramatic shift in market sentiment. The market's response to AI has evolved from favoring increased capital expenditure to a growing skepticism about future investments and returns.
Despite these concerns, Melson remains optimistic about a year-end rally, driven by a cooling labor market and improving inflation trends. He believes that Nvidia's upcoming earnings will further solidify the AI cycle's resilience, dispelling any bearish outlook.
This week, investors will closely monitor economic data that could influence the trajectory of interest rate decisions. Fed funds futures traders predict a 40% chance of a rate cut, a significant decrease from the 90% probability estimated a month ago. The Federal Reserve's October meeting minutes and September nonfarm payrolls release, the first economic data post-U.S. government shutdown, are scheduled for Wednesday and Thursday, respectively.
Additionally, this week will bring earnings reports from major consumer brands like Walmart, Home Depot, and Target. The market will be keen to gauge consumer spending patterns as the holiday shopping season commences.
According to S3 Partners, a short-interest monitoring firm, the October high in a basket of highly shorted stocks resembles a 'blow-off top.' Despite outperforming the S&P 500 year-to-date, the basket's performance has cooled since October 15, when it climbed by over 70%. S3 attributes this to the persistence of high short interest, where short-interest-heavy names have led returns, often overshadowing fundamentals with positioning stress and squeezes.
