S&P 500; US Indexes Fundamental Daily Forecast – Stocks Expected to Open Sharply Lower

The major U.S. stock indexes are set up for a major drop today, given the steep declines in the pre-market futures session. U.S. investors are responding to the weaker trade in Asia and Europe.

In the futures market at 1104 GMT, the June E-mini S&P 500 Index is trading 2741.50, down 14.50 or -0.53%. The June E-mini Dow Jones Industrial Average is at 24838, down 127 or -0.51% and the June E-mini NASDAQ-100 Index is trading 6952.25, down 91.75 or -1.30%.

The theme of the early trade is being driven by concerns over a potential trade war and turmoil within the U.S. administration. Stocks in Asia and Europe posted losses during their respective trading sessions, mostly on concerns surrounding a possible trade war.

Asian markets finished mixed on Monday. Japan’s Nikkei 225 closed at 21,480.90, down 195.61 or -0.9 percent. Besides trade war worries, the index took a hit on the back of an ongoing political scandal involving Prime Minister Shinzo Abe over the sale of state-owned land.

European markets were also lower on Monday morning. Investors were reacting to a possible trade war as well as the Federal Reserve’s monetary policy meeting later this week.

Forecast

We’re looking for the early selling pressure to continue throughout the day. The sell-off is not too much of a surprise since the markets tend to dip ahead of central bank meetings especially when a rate hike is expected and uncertainty over future rate hikes is high.

Elevated volatility will also be an issue. This has been the theme since early February when the stock indexes plunged into correction territory. Although the NASDAQ-100 Index reached a new all-time high last week, the S&P 500 Index and the Dow failed to do so. This suggests investors are being very selective about the stocks they are buying.

The recent weakness in the S&P 500 Index and Dow also suggests traders are expecting a negative impact from Trump’s tariffs. They can continue to retreat if there is retaliation against these tariffs.

The NASDAQ is likely trading sharply lower because investors are anticipating that a Trump tariff against China will center on technology and intellectual property.

All three major indexes will take a hit if the White House shake-up continues.