NASDAQ 100, Dow Jones, S&P 500: Stability Persists as Investors Await Inflation Data, Fed Meeting

Highlights

• US stock futures remain flat after S&P 500 hits new high.
• Earnings reports of Dave & Buster’s and Stitch Fix attract attention.
• Investors cautious ahead of inflation data and Federal Reserve meeting.

Overview

The major US stock futures contracts are trading flat overnight, marking a consecutive session of stability after the S&P 500 reaches its highest closing level of 2023. Investors are keeping an eye on the tail-end of earnings season, with notable results from Dave & Buster’s and Stitch Fix. Following their earnings reports, Dave & Buster’s is seeing a 4% gain after the bell, while Stitch Fix is adding nearly 5%.

On Wednesday, futures tied to the Dow Jones Industrial Average are dipping 46 points or 0.14%, while S&P 500 futures and Nasdaq-100 futures are down 0.12% and 0.28% respectively.

During Tuesday’s regular trading session, stocks posted modest gains. The broad S&P 500 index rose 0.24%, reaching its highest level since August 2022, while the Nasdaq Composite closed with a 0.36% increase, marking its highest close in 2023. The Dow Jones Industrial Average, however, saw a slight uptick of 0.03%. Declines in component health stocks Merck and UnitedHealth hindered it.

Investors Cautious Ahead of CPI Data

Investors are remaining cautious as they await inflation data and the Federal Reserve’s policy meeting scheduled for next week. Analysts anticipate a slight cooling in consumer prices for May compared to the previous month. However, core prices are expected to remain elevated. As a result, the market widely expects the Fed to keep interest rates high.

Market Surge Spurs Broader Outlook

The S&P 500’s remarkable 20% surge from its October 2022 lows, driven by gains in megacap stocks, a robust earnings season, and optimism regarding the Fed’s interest rate-hike cycle nearing its end, is causing some investors to take a breather. However, the market is showing signs of broadening, as investors are shifting away from focusing solely on a handful of top-performing stocks.

Data and Fed Remarks Impact Rate Outlook

Recent economic data and dovish remarks from Fed officials have raised the chances of a pause in rate hikes. The Fed is sheduled to meet on June 13-14. Traders estimate an 80% likelihood of rates remaining in the 5%-5.25% range. However, there is a 50% probability of a 25-basis-point rate hike in July.

S&P Sectors Gain, Financials Lead

In Tuesday’s session, seven major S&P sectors are finishing with gains, particularly the financial sector, which is adding 1.3%. This increase is being supported by regional banking stocks and industry bellwethers like Goldman Sachs and Morgan Stanley. While Tuesday’s uptrend is not as robust as the previous week’s rally, the continued modest gains without sharp pullbacks could indicate positive momentum moving forward, according to Adam Sarhan, CEO of 50 Park Investments.

Economic Data Light, Campbell Soup Earnings

Looking ahead, economic data remains light leading up to the Federal Reserve policy meeting, with trade balance data scheduled for release before the opening bell on Wednesday. Additionally, earnings reports from Campbell Soup and GameStop are on the horizon, shaping the market’s outlook in the near term.