An economist said declining bond yields, cooling housing, and a slackening labor market give the Fed ample cover to pivot.
U.S. stock futures traded modestly lower after the S&P 500 Index clocked a record for a second straight session on Monday. The lingering economic and geopolitical uncertainties may provide traders with sufficient reason to take some profit on the recent gains.
Some key economic data and any progress on the trade deal front, and President Donald Trump’s tax bill could also have a say on the day’s sentiment.
As of 1:56 a.m. ET on Tuesday, the Nasdaq 100 futures and the Russell 2000 futures slipped over 0.20% each. The S&P 500 and Dow futures were down 0.16% and 0.11%, respectively.
Stocks closed Monday’s session solidly higher, with the buying interest perking up in late-afternoon trading. Traders took heart from the resumption of trade talks between Canada and the U.S. following the former's repeal of the “Digital Services Tax” on tech companies, and data that supported the case for rate cuts.
IT and financial stocks led from the front, with the latter reacting to the bank stress test results.
The Invesco QQQ Trust (QQQ) ETF and the SPDR S&P 500 ETF (SPY) advanced 0.65% and 0.48%, respectively.
The SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.61%, while the iShares Russell 2000 ETF (IWM) rose 0.14%.
On Stocktwits, retail sentiment toward the SPY ETF turned 'neutral' (52/100) by late Monday, down from 'bullish' the day before, while the mood toward the QQQ ETF remained 'bearish.' The message volume remained 'normal' for both.
On the economic front, Federal Reserve Chairman Jerome Powell is due to participate in a policy panel before the European Central Bank Forum on Central Banking 2025. He is scheduled to speak at 9:30 a.m. ET.
S&P will release the final U.S. manufacturing purchasing managers’ index (PMI) for June at 9:45 a.m. ET, with economists estimating an average reading of 52. The Institute for Supply Management is due to report its manufacturing PMI for June at 10 a.m. ET. The reading is expected to show continued ‘contraction’ by the sector.
At 10:00 a.m. ET, the Bureau of Labor Statistics will release the results of the May Job Openings and Labor Turnover survey. The consensus expects job openings to slip to 7.3 million from 7.4 million in the previous month.
MSC Industrial (MSM), Constellation Brands (STZ) and Greenbrier (GBX) are the noteworthy names reporting their quarterly results on Tuesday.
WisdomTree Senior Economist Jeremy Sigel expects the stock rally to continue. In his weekly commentary, the economist said that declining bond yields, cooling housing markets, and a slackening labor market give the Fed ample cover to pivot.
“Until it does, equity momentum can grind higher on squeezed shorts, AI productivity and margin improvements,” he added.
Morgan Stanley Equity Strategist Michael Wilson also expressed bullishness. The strategist said, “While there could be some consolidation during 3Q, we remain bullish on a 6-12 month horizon as EPS tailwinds expand, and the market has line of sight to Fed cuts.”
Crude oil futures have pulled back below the $65-a-barrel mark, while gold futures firmed up by about a percent, with an ounce of the yellow metal trading above $3,340.
The 10-year U.S. Treasury note yield continued to slip toward the 4.20% mark.
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