Why Nasdaq, S&P 500 Futures Are Ripping Higher – Invesco QQQ Trust, Series 1

U.S. stocks look to bounce back on Tuesday following an across-the-board sell-off in the previous session. Strategists say all the yen carry trades haven’t been unwound yet, which raises the specter of incremental weakness. That said, positive reactions to earnings from tech players such as Palantir Technologies Inc. PLTR and Navitas Semiconductor Corporation NVTS could buoy sentiment.

Tech stocks are reversing course, riding on these positive earnings. The CBOE Volatility Index, widely known as VIX, has pulled back notably toward the 32 level. Given the absence of any major catalysts, volatility will likely remain contained.

Cues From Last Session:

Wall Street closed Monday’s session notably lower, although off its intraday lows. The global equity market plunge set in motion by the Japanese market on Monday spilled over into the U.S. The major averages opened notably lower but a report that showed that the service sector moved into expansion territory helped them trim some of the losses. Yet the averages closed the session sharply lower.

The S&P 500 and the Nasdaq Composite fell for a third straight session, settling at three-month lows, while the Dow Jones Industrial Average retreated to its lowest since June 14.

The sell-off was across the board, with the IT, communication services and consumer discretionary stocks plunging hard.

The recent correction is healthy for the market, according to WisdomTree Senior Economist and Wharton professor Jeremy Siegel. Volatility has finally returned to the market, the economist said, adding that this equity risk is what creates a premium long-term return.

A correction of 5-10% from the highs is healthy, Siegel said. “I would be more worried had the market continued to surge higher with no correction and created more bubble-like conditions,” he said.

“In the short run, if the Fed does not indicate that it will react soon, the outlook is very unsettled.”

Carson Group’s Chief Market Strategist Ryan Detrick sees light at the end of the tunnel. Drawing on historical data, the strategist noted that when the S&P 500 Index falls by at least 1% on Thursday, Friday, and Monday, strong returns are typically observed three months later. Historically, this pattern has resulted in gains 90% of the time, with an average increase of around 10%.

“A year later up 18 of 21 and up 22.5% on avg,” he added.

Upcoming Economic Data:

• The Commerce Department is scheduled to release its trade balance report for June at 8:30 a.m. EDT. Economists, on average, expect a narrowing of the trade deficit from $75.1 billion in May to $72.5 in June.
• The Treasury will auction three-year notes at 11:30 a.m. EDT.

Stocks In Focus:

• Palantir climbed over 7% in premarket trading following the company’s quarterly results.
• The other stocks moving on earnings are Lucid Group, Inc. LCID (up 9%), ADTRAN Holdings, Inc. ADTN (down about 7.50%), Navitas Semiconductor (up about 5%), ZoomInfo Technologies Inc. ZI (down nearly 15%), Teradata Corporation TDC (down about 8%) and Yum China Holdings, Inc. YUMC (up over 8%)
• Caterpillar, Inc. CAT, Constellation Energy Corporation CEG, Duke Energy Corporation DUK, Expeditors International of Washington, Inc. EXPD, Fox Corporation FOXA, GLOBALFOUNDRIES Inc. GFS, Hyatt Hotels Corporation H, Molson Coors Beverage Company TAP, Uber Technologies, Inc. UBER, WK Kellogg Co KLG and Yum! Brands, Inc. YUM are among the key companies due to release their earnings reports ahead of the market opening.
• Those reporting after the close are Airbnb, Inc. ABNB, Coupang, Inc. CPNG, Devon Energy Corporation DVN, Amgen, Inc. AMGN, Cirrus Logic, Inc. CRUS, Exelixis, Inc. EXEL, Fortinet, Inc. FTNT, GoPro, Inc. GPRO, Illumina, Inc. ILMN, Jack in the Box Inc. JACK, IAC Inc. IAC, Tripadvisor, Inc. TRIP, Reddit, Inc. RDDT, Rivian Automotive, Inc. RIVN, Sunrun Inc. RUN, Wynn Resorts, Limited WYNN and Super Micro Computer, Inc. SMCI.

Commodities, Bonds And Global Equity Markets:

Crude oil futures rebounded after three straight sessions of declines and gold futures also advanced moderately, while the 10-year benchmark Treasury note yield rose 5.4 basis points to 3.836%.

Bitcoin (CRYPTO: BTC) climbed over 6.5% and approached the $55K level.

In Asia, the sentiment was mixed. The Japanese market, which was the epicenter of Monday’s sell-off, rebounded strongly, with the Nikkei 225 average climbing over 10%. The Taiwanese and South Korean markets also rose notably. The Chinese market advanced, although the gain was much more modest, and the Australian market finished strong amid the nation’s central bank deciding to keep interest rates unchanged. On the other hand, the Indian, Malaysian, Hong Kong and New Zealand markets moved to the downside.

European stocks were lower in early trading amid volatility.

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