S&P 500, NASDAQ Buyers Encouraged by Easier Fed Ahead of Microsoft Earnings

James Hyerczyk
Updated: Jan 24, 2023, 13:40 UTC

With investors somewhat comfortable that they’re going to see lower rate hikes from the Fed money is flowing into the S&P Tech Sector, NASDAQ.

S&P 500 Index, NASDAQ Composite, Dow Jones

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The major U.S. stock index futures are nearly flat early Tuesday as investors looked to extend the current two-day rally on the back of a busy stretch of corporate earnings.

At 05:00 GMT, the blue chip Dow Jones Industrial Average futures are trading 33728.00, up 1.00 or 0.00%. Benchmark S&P 500 Index futures are at 4036.25, down 0.25 or -0.01% and tech-weighted NASDAQ Composite futures are at 11928.00, down 6.00 or -0.05%.

Daily NASDAQ 100 Index

Wall Street Extends Rally, Fueled by Tech Bounce

The early subdued move in futures contracts comes after a solid start to the week on Wall Street. Stocks closed sharply higher on Monday, powered by surging technology stocks as investors began an earnings-heavy week with a renewed enthusiasm for market-leading momentum stocks that were beaten up last year.

All three major stock indexes extended Friday’s gains, with the tech-heavy NASDAQ leading the pack, boosted by semiconductor shares.

Of the 11 major S&P 500 sectors, all but energy ended green, with tech shares enjoying the largest percentage gain, up 2.3% on the session.

Focus Remains on Fed Policy

Monday’s session marked the calm before the storm ahead of a week jam-packed with high profile earnings reports and back-end loaded with crucial economic data.

Additionally, investors are nearly 100% certain the Federal Reserve will implement a small-sized interest rate hike next week even as the U.S. central bank remains committed to taming the hottest inflationary cycle in decades.

Financial market traders have priced in a 99.9% likelihood of a 25 basis point rate hike to the Fed funds target rate at the conclusion of its two-day monetary policy meeting next Wednesday, according to the CME’s FedWatch tool.

Investors Betting on Easier Fed to Boost S&P 500, NASDAQ Composite Tech Shares

With investors somewhat comfortable that they’re going to see lower rate hikes from the Federal Reserve and that the central bank is nearing its terminal rate level, money is flowing into areas that could do well in that kind of environment. This means the bets are moving into big growth stocks that drive both the S&P 500 technology sector and the tech-heavy NASDAQ Composite.

Looking Ahead…

On Tuesday, General Electric, Johnson & Johnson and Verizon are among the key companies reporting earnings before the bell.

Software giant Microsoft is scheduled to report on Tuesday afternoon, following the closing bell.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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