Nasdaq 100 and S&P 500: Resilience Amid Dow Jones Decline and Earnings Reports

Market Outlook: Dow Lags as S&P 500 and Nasdaq Edge Higher Amid Earnings and Fed Meeting

U.S. stock futures showed mixed performance on Tuesday, with the Dow Jones Industrial Average lagging behind its peers as investors digested a flurry of corporate earnings and awaited the Federal Reserve’s policy meeting outcome. While the S&P 500 and Nasdaq futures drifted slightly higher, the Dow faced downward pressure due to disappointing results from some of its key components.

At 13:08 GMT, Dow Futures are trading 40737.00, down 34.00 or -0.08%. S&P 500 Index Futures are at 5512.75, up 9.75 or +0.18% and Nasdaq 100 Index futures are trading 19267.25, up 58.00 or +0.30%.

Dow Underperformance; Merck Weighs

The Dow’s underperformance can be attributed to weak showings from several of its constituent stocks. Merck, a significant Dow component, saw its shares decline over 2.7% in premarket trading due to weaker-than-expected full-year guidance, despite reporting strong second-quarter results. Similarly, Procter & Gamble, another Dow heavyweight, experienced a 4.6% drop following mixed quarterly results. These setbacks in major Dow stocks contributed to the index’s lackluster performance compared to the broader market.

S&P 500 and Nasdaq Resilience; Pfizer Boost

In contrast to the Dow, the S&P 500 and Nasdaq displayed resilience, buoyed by strength in technology and healthcare sectors. Pfizer, though not a Dow component, saw a 2% increase following better-than-anticipated earnings and revenue, raising its full-year outlook. This positive sentiment in the healthcare sector helped offset some of the negative impact from Merck’s guidance.

Fed Meeting in Focus

The Federal Reserve’s two-day policy meeting, which began Tuesday, remains a central focus for investors across all indices. Traders are keenly awaiting signals from Chair Jerome Powell regarding the timing and number of potential rate cuts. Market expectations, as reflected in the CME FedWatch Tool, indicate a 100% probability of a rate reduction by September, potentially providing support for equities.

Earnings Drive Market Sentiment

Corporate earnings continue to be a key driver of market sentiment. Tech sector developments, including a 3.5% drop in CrowdStrike shares following reports of potential legal action by Delta Air Lines, have added to market volatility. Investors are closely watching for earnings reports from tech giants Microsoft and Advanced Micro Devices, scheduled for release after the closing bell, which could further influence the Nasdaq’s performance.

Economic Data and Outlook

Traders are also keeping an eye on important economic data releases, including job openings for June and consumer confidence figures for July. These indicators could provide insights into the overall health of the economy and influence Fed decision-making.

Bank of America’s head of U.S. equity and quantitative strategy, Savita Subramanian, noted that both 2024 and 2025 consensus earnings per share estimates are holding up, suggesting analyst comfort with current projections. This indicates a relatively positive outlook for corporate profitability across the broader market.

Market Forecast

The short-term market outlook appears cautiously optimistic, with the S&P 500 and Nasdaq showing more upside potential compared to the Dow. Positive factors include trending lower inflation, supporting potential Federal Reserve rate cuts, and generally robust corporate earnings outside of some Dow components. However, sector-specific challenges and the ongoing Fed meeting may introduce volatility.

Investors should remain vigilant, particularly regarding the divergence between the Dow and other indices. While the broader market shows resilience, the underperformance of key Dow stocks highlights the importance of sector and stock-specific analysis in the current market environment.

Technical Analysis

E-mini Dow futures are edging higher after a pre-market setback. The short-term range is 41672 to 40053. Buyers have pushed the blue chip average to the strong side of its 50% level at 40863, making it support. Traders should watch this level over the near-term since it will influence the direction of the Dow.

On the downside, the market remains well-supported by the 50-day moving average at 39828.