Nasdaq, S&P 500 Futures Firm Up Ahead Of Retail Sales Data – Invesco QQQ Trust, Series 1

U.S. stocks are priming for a positive start on Tuesday ahead of the release of the key August retail sales report. Traders could throng the tech space as they seek to take advantage of the recent pullback. The market and experts are divided over the magnitude of a rate cut, but a 25 basis-point cut could trigger an initial negative reaction. That said, most believe that the state of the labor market and economy could take preeminence over the rate trajectory, going forward.

The August retail sales data could be on traders’ radar on Tuesday. Fund manager Louis Navellier said a disappointing report could tilt the scales toward a bigger cut on Wednesday. Wharton professor and Wisdom Tree Senior Economist Jeremy Siegel said he would like the Fed to move quickly. But so far, the market is comfortable with the Fed funds rate reaching the three handle by the middle of next year, he added.

In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust (NYSE: SPY added 0.38% to $564.99 and the Invesco QQQ ETF (NASDAQ: QQQ) gained 0.58% to $476, according to Benzinga Pro data.

Cues From Last Session:

Wall Street closed Tuesday’s session on a mixed note, with Apple, Inc. AAPL leading the tech-heavy Nasdaq Composite lower, while the S&P 500 and the Dow Industrials closed in the green. The positive close by the broader gauge took the index’s winning streak to six sessions, with better-than-expected regional manufacturing data giving the thrust on a day when it traded below the unchanged line for much of the session.

The S&P 500 Index is now a step closer to its all-time closing high of 5,667.20 reached on July 16.

Energy, financials, material and utility stocks gained ground, while IT stocks came under significant selling pressure.

Insights From Analysts:

Despite market expectation for a 50 basis-point cut, Morgan Stanley analyst Seth Carpenter said he expects a more modest 0.25% reduction. The economist expects the FOMC statement to acknowledge further progress on inflation and risks to the labor market. The dot-plot chart, which is part of the Summary of Economic Projections, will show that the number of cuts this year will be three instead of the previously suggested one.

Chairman Jerome Powell may not commit to a cadence for cuts but suggest future rate moves will be data-dependent, the economist said. In all, Carpenter anticipates three 25 basis-point reductions this year.

Morgan Stanley’s Chief U.S. Equity Strategist Mike Wilson believes that the labor/growth data will be more important to how stocks ultimately trade over the next three to six months. If the labor/growth data strengthen from here, a series of 25 basis-point rate cuts into the middle of next year can further support valuations in a “late cycle” context, he said.

But he warned that the market can trade with a risk-off tone if the labor data weakens from here, regardless of whether the Fed’s first move is 25 or 50 basis points.

The best-case scenario for equities this week is a 50 basis-point cut without triggering either growth concerns or any remnants of the yen carry trade unwind, the strategist said, adding that defensives and large-caps tend to outperform cyclicals and small-caps, respectively, both before and after the first cut.

See Also: How To Trade Futures

Upcoming Economic Data:

• The Commerce Department is scheduled to release its August retail sales report at 8:30 a.m. EDT. Economists, on average, estimate a 0.2% month-over-month drop in retail sales, reversing some of the 1% gain in July. Retail sales, excluding autos, may have risen 0.2%, slower than July’s 0.4% growth.
• The Federal Reserve’s industrial production report, due at 9:15 a.m. EDT, is widely expected to show a 0.2% month-over-month increase for August following a 0.6% drop in July.
• The Commerce Department will release its business inventories report at 10 a.m. EDT. The consensus estimate calls for a steady pace of 0.2% month-over-month growth for July.
• The National Association of Home Builders housing market index for September is expected to come in at 40, up from 39 in July. The metric, which measures homebuilders’ confidence, is scheduled to be released at 10 a.m. EDT.
• The Treasury is set to auction 20-year bonds at 1 p.m. EDT.

Stocks In Focus:

• Intel Corp. INTC rose over 6% in premarket trading after the company announced an agreement to supply custom artificial intelligence chips to Amazon, Inc.’s AMZN AWS.
• Viasat Inc. VSAT fell over 5.60%, reacting to a negative analyst action.
• Microsoft Corporation MSFT climbed over 1.50% after the company announced a $60 billion stock buyback plan and a 10% dividend hike.

Commodities, Bonds And Global Equity Markets:

Crude oil and gold futures pulled back after Monday’s strong gains, with the latter holding above the $2,600 mark despite the modest decline, and the benchmark 10-year Treasury note edged down slightly 3.619% ahead of Wednesday’s Fed decision. Bitcoin BTC/USD climbed past the $59K mark.

The global markets turned higher in anticipation of a Fed rate cut, with most major markets in Asia ending higher for the day. The Japanese market, which reopened after Monday’s public holiday, retreated amid the yen’s strength, and the New Zealand market extended its post-central bank meeting losses. The Chinese and South Korean markets remained closed for public holidays.

European stocks were solidly higher in early trading.

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