S&P500: Market Forecast Today Points to Strength in Cyclicals, Weakness in Tech

Dow and S&P 500 Set to Open Higher — But Tech Rotation Continues

The major U.S. stock indexes are expected to open mixed on Wednesday based on the performances in the futures market. With the Dow and S&P 500 posting early gains and the Nasdaq-100 Index under pressure, investors are wondering if the rotation out of technology stocks will continue today.

At 14:52 GMT, the Dow Jones Industrial Average is trading 49470.15, up 229.16 or 0.47%. The S&P 500 Index is at 6920.26, up 2.45 or +0.04% and the Nasdaq Composite is trading 23180.022, down 75.163 or -0.32%.

Cyclicals Lead While Tech Gets Hammered Again

On Tuesday, the Dow was the strongest performer with investors moving into cyclical stocks like Walmart. Investors also showed interest in Caterpillar. But this came at the expense of major technology issues including Nvidia and Microsoft which lost more than 2% each. The sell-off also spread to big-name artificial intelligence infrastructure names, Broadcom, Oracle and Micron, according to CNBC.

AMD Plunges 9% on Weak Guidance — Software Extends Bear Market

Overnight, Advanced Micro Devices (AMD) was a big loser, dropping 9% after its first quarter forecast failed to impress analysts. Sellers continued to hit Broadcom and Micron too. Software stocks, which fell into a bear market last week, were also under pressure with Oracle and CrowdStrike extending losses in pre-market trading.

Other stocks on the move ahead of the opening were Super Micro Computer, up 9%, Silicon Laboratories, up 50%, and Take-Two Interactive Software, up 5%.

ADP Payrolls Miss — Just 22,000 Jobs Added in January

In economic news, ADP reported that private payrolls rose just 22,000 in January, below the 45,000 jobs forecast.

Dow Futures Hold Above 50-Day MA — Poised to Challenge Recent Highs

Ahead of the cash market opening, E-mini Dow Futures are up and in better shape than the other major indexes. It’s holding well above the 50-day moving average support at 48772 and close enough to be a threat to the last three main tops at 49767, 49795 and 49901. If the rotation out of technology shares continues, then the Dow could be a great beneficiary.

S&P 500 Hovers Near 50-Day MA — Record High at 7043 in Play

The E-mini S&P 500 Futures contract is marginally higher, hovering slightly above its 50-day moving average at 6927.00. A sustained move over this indicator will signal the presence of buyers. If upside momentum builds on the move, then look for traders to take a near-term shot at the record high at 7043.00.

A failure to hold the 50-day moving average will indicate that sellers are taking control. This could lead to a test of the 2025 close at 6892.50. If this fails, then look for the selling to open up with potential targets at 6864.50 and 6814.50.

Nasdaq-100 in the Worst Shape — Testing Key Support Levels

The E-mini Nasdaq-100 Index is in the worst shape of the three. It’s on the weak side of a downtrend line at 25406.00, a 50% level at 25411.75 and the 50-day moving average at 25663.00. If the selling intensifies, the index could continue down to 25180.25, followed by 25025.00.

Overcoming the 50% level at 25411.75 will give the index a chance to retest and possibly regain the 50-day moving average.

Tech Weakness Could Cap Gains Across the Board

Looking ahead, the Nasdaq is the weakest index. Gains could be limited in the S&P 500 Index and Dow if sellers continue to press technology stocks lower. It’s hard to find a reason to step into technology stocks ahead of the release of Alphabet earnings on Wednesday after the close and Amazon’s report on Thursday.

More Information in our Economic Calendar.