U.S. stock futures are falling early Wednesday as the prospect of lower interest rates shifted interest to smaller companies over the high-value technology firms that have recently driven gains.
Traders are turning to sectors outside tech after a long run of spectacular gains for the likes of Nvidia, Microsoft, Apple, and Tesla. The Russell 2000 index of small-cap stocks surged 3.5% on Tuesday, helped by decent retail sales figures and investors’ increasing confidence that the Federal Reserve will start lowering interest rates in September.
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(Dreamstime)
U.S. stock futures were dropping early Wednesday as the prospect of lower interest rates shifted interest to smaller companies over the high-value technology firms that have recently driven gains.
Futures for the Dow Jones Industrial Average lost 101 points, or 0.2%. S&P 500 futures fell 0.7%, and contracts tracking the technology-heavy Nasdaq dropped 1.2%. All three indexes rose on Tuesday, with the Dow having its best day in more than a year.
Traders are turning to sectors outside tech after a long run of spectacular gains for the likes of Nvidia, Microsoft, Apple, and Tesla. The Russell 2000 index of small-cap stocks surged 3.5% on Tuesday, helped by decent retail sales figures and investors’ increasing confidence that the Federal Reserve will start lowering interest rates in September.
“Rotation is the key word in financial markets at the moment,” said Jim Reid, a strategist at Deutsche Bank. “That strength in retail sales did work against the other main theme at the moment, which is the growing anticipation about rate cuts. But ultimately, near-term expectations for rate cuts didn’t shift too much.”
Bond yields were mixed, with two-year yields rising and 10-years slipping. The rate on the benchmark 10-year U.S. Treasury bond was at 4.181% early Wednesday compared with 4.194% Tuesday. The yield on the 2-year note was at 4.461%, compared with 4.442%.
By
Giulia Petroni, Dow Jones Newswires
Oil prices were edging higher after opening the session lower as reports that U.S. crude stockpiles fell last week counter concerns over the demand outlook in China.
Crude oil inventories fell by 4.4 million barrels in the week ended July 12, according to reports citing the American Petroleum Institute. This would be the third drop in a row and a bullish sign on demand trends in the world’s top consumer if confirmed by official data from the Energy Information Administration later on Wednesday.
Prices are also supported by growing expectations that the Federal Reserve will start cutting rates in September, with the latest U.S. retail sales figures also damping fears of a slowdown in the economy.
Brent and WTI were up 0.4% to $84.03 and $81.11 a barrel, respectively.
By
Jessica Fleetham, Dow Jones Newswires
The dollar could perform well over the summer as bets on Republican candidate Donald Trump winning the U.S. presidential election offset prospects of interest-rate cuts, ING currency strategist Francesco Pesole said in a note.
Above-forecast retail sales data on Tuesday hasn’t dented the chances that the Federal Reserve will cut rates in September, with money markets fully pricing this in, he said. “The reason why the dollar has been resilient despite the rise in dovish [rate-cut] bets is undoubtedly the emergence of ‘hedges’ for higher inflation, tariffs, and geopolitical risks ahead of a Trump re-election.”
Periods of dollar outperformance this summer are therefore more likely, he says. The DXY dollar index fell 0.1% to 104.145.
