U.S. stock futures were relatively flat on Tuesday night following a second consecutive day of losses for the Dow Jones Industrial Average, signaling a rough start to the quarter. Dow futures dropped by 3 points or 0.01%, while S&P 500 and Nasdaq 100 futures remained unchanged. The markets had a negative response to inflation data from the previous week, causing concerns that the Federal Reserve may delay interest rate cuts. Treasury yields increased, reaching the highest level since November, and oil prices rose to five-month highs.
The 30-stock Dow experienced a significant drop of nearly 400 points, or 1%, on Tuesday. The S&P 500 and Nasdaq Composite also saw losses of 0.7% and nearly 1%, respectively. Despite these declines, some market experts are optimistic about the overall outlook for equities, attributing the recent pullback to a need for consolidation following a strong start to the year. The S&P 500 had its best first quarter performance since 2019. Kristen Bitterly, global wealth head of investment solutions at Citi, stated that the fundamental backdrop, including the Fed’s trajectory towards lower interest rates, decreasing inflation, and improving earnings, is supportive for risk assets.
Investors are expecting more insights into the labor market on Wednesday with the release of the ADP private payrolls report and the upcoming March jobs data on Friday. The ISM services index is also set to be released during the day. Federal Reserve Chair Jerome Powell is scheduled to speak, along with a number of other central bank officials including Fed Governors Michelle Bowman and Adriana Kugler, Chicago Fed President Austan Goolsbee, and Fed vice chair for supervision Michael Barr. Additionally, Levi Strauss is expected to report earnings after the market closes.
Overall, the markets are grappling with concerns related to inflation, interest rates, and geopolitical tensions, leading to a period of volatility and uncertainty. Despite the recent pullback in stock prices, some analysts remain positive on the outlook for equities, citing favorable fundamental factors such as improving earnings and expectations for lower interest rates. Investors will be closely monitoring economic data releases and speeches from central bank officials for further insights into the state of the economy and potential market moves in the coming days.
