Benchmark S&P 500 Index Inching Higher Ahead of Fresh Batch of US Economic Data

The major U.S. stock indices are inching higher shortly before the cash market opening on Tuesday as the markets try to recover from the previous session’s steep sell-off.  Investors shouldn’t read too much into the premarket move since concerns about aggressive signals from the Federal Reserve on interest rate hikes are likely to keep a lid on prices.

Meanwhile, we’re probably just looking at some light position-squaring ahead of a slew of U.S. economic reports that could have some influence on the Fed’s next interest rate decision in September.

On Monday, the blue chip Dow Jones Industrial Average settled at 33063.61, down 643.13 or -1.91%. The benchmark S&P 500 Index closed at 4137.99, down 90.49 or -2.14% and the tech-weighed NASDAQ Composite finished at 12381.57, down 323.64, down 2.55%.

Investors Await Clues on the Strength of the US Economy

In the U.S., Treasury yields and the U.S. Dollar Index dipped on Tuesday as investors prepared to react to a fresh batch of economic data, while looking ahead to a widely anticipated speech by Fed Chairman Jerome Powell at the Jackson Hole central bankers’ symposium.

On the data front, the Philadelphia Federal Reserve nonmanufacturing survey for August will be released at around 12:30 GMT on Tuesday. A flash reading of the manufacturing purchasing managers’ index for August and services PMI for August is slated for 13:45 GMT.

New Home Sales for July and the Richmond Fed Survey for August will both be released slightly later in the session.

Finally, Minneapolis Fed President Neel Kashkari is scheduled to deliver remarks on the health of the world’s largest economy. Kashkari is a note dove, but recently switched his allegiance to the hawkish side, by calling for a series of aggressive rate hikes to stop inflation.

Stocks Making the Biggest Moves Ahead of the Opening

Shares of Zoom Video Communications (ZM) are taking a double-digit hit shortly before the opening on Tuesday after the video conferencing company cut its full-year forecast.

Zoom reported better-than-expected earnings for its latest quarter, but revenue fell short of forecasts, according to its financial statements.

Zoom’s CFO tried to explain away the company’s poor performance by saying it is having difficulty attracting new, paying subscribers, although he added that enterprise sales are strong.

In the premarket at 12:25 GMT, Zoom is trading $86.47, down $10.97 or -11.26%.

In other news, Palo Alto Networks (PANW) is up over 9% in premarket trading after the cybersecurity company reported better-than-expected quarterly results and issued an upbeat forecast. Palo Alto also announced its board of directors had approved a 3-for-1 stock split.

At 12:25 GMT, Palo Alto Networks is trading $557.98, up $49.93 or +9.83%.

Daily Forecast

Despite Monday’s steep sell-off and overall five day decline, the trend is still up, so some investors may treat this weakness as a buying opportunity. However, gains could be limited because of falling volume ahead of Friday’s highly anticipated speech from Fed Chair Jerome Powell at the central bankers’ symposium at Jackson Hole, Wyoming.

Long-term investors know it’s not a good idea to fight the Fed. Short-term traders may not want to take a position ahead of Powell’s speak until they get some clarity about the economy and the size of the next rate hike in September.

Based on this assessment, we could see some early short-covering due to bargain hunting following Monday’s decline, but interest rate hike fears will likely put a cap on gains, preventing a meaningful, prolonged rally.