(Bloomberg) — U.S. stock futures remained in narrow ranges as investors looked forward to a rush of big gains to provide insight into whether the record-breaking stock rally can continue.
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Monday's latest record close on Wall Street pushed the S&P 500's gains this month to 3.3%, while the Nasdaq 100 rose 4.6%. In premarket trading on Tuesday, General Motors Co. rose 8% after beating earnings expectations, while United Parcel Service Inc. fell as its revenue forecast fell short of forecasts. Europe's Stoxx 600 index rose to a new two-year high as auto and banking stocks led the gains.
The busiest week so far this reporting season is moving up a gear. Microsoft Corp. and Alphabet Inc. will later provide initial evidence of whether the bullish sentiment surrounding the so-called Magnificent Seven appears sustainable. When Apple Inc., Amazon.com Inc. and Meta Platforms Inc. finish reporting on Thursday, five tech giants with a combined market value of over $10 trillion will have updated the market.
The tech rally was fueled by expectations that interest rate cuts from the Federal Reserve will help boost profit growth. While the Fed is expected to keep interest rates on hold this week, investors are eagerly awaiting Chairman Jerome Powell's comments following Wednesday's decision for clues on the policy outlook. Traders believe there is about the same chance that the central bank will start cutting borrowing costs at its next meeting in March.
“The next three days between the Fed meeting and the U.S. tech results are where everything will play out,” said Alexandre Baradez, chief market analyst at IG Markets in France. “The market is waiting for Powell to open the door for a rate cut in March, but this could well be signaled for the second quarter.”
The story goes on
According to JPMorgan Chase & Co. quantitative strategists led by Khuram Chaudhry, the role of a small number of stocks in driving Wall Street's advance poses a risk to the market and has much in common with the dot-com bubble.
The share of the top 10 stocks in the MSCI USA index, including all of the “Magnificent Seven” – Apple, Microsoft, Nvidia Corp., Alphabet, Amazon, Meta and Tesla – rose to 29.3% as of the end of December. This is only moderately below the historical peak share of 33.2%, which was achieved in June 2000, the strategists write. And there are only four sectors represented in the top 10 stocks, compared to the historical average of six.
“The key takeaway is that extremely concentrated markets represent a clear and present risk to equity markets in 2024,” Chaudhry said. “Just as a very limited number of stocks accounted for the bulk of the gains in the MSCI USA, declines in the top 10 could drag down equity markets.”
Treasury yields continued their decline on Tuesday after a cut in the U.S. Treasury's quarterly borrowing estimate eased concerns about the flood of debt being issued to cover the federal deficit. The dollar remained stable.
In commodities, oil prices held steady as the market awaited a U.S. response to the deadly attack on American troops in Jordan, which could escalate tensions in a region important to global crude production.
Stocks fell earlier in Asia, driven by declines in China as pressure mounted on policymakers to cut interest rates to stimulate the economy. Shares in Hong Kong fell more than 2%, while stocks on the mainland were expected to fall for a third day. The impact of China Evergrande Group's liquidation order on Monday sent a Bloomberg index of Chinese developers down over 4%.
China's benchmark government bond yield fell to its lowest level in nearly 22 years as expectations of further monetary easing grew.
Elsewhere, the Nigerian naira plunged to a record against the dollar after an overhaul of the exchange rate setting method, effectively marking the second devaluation of the currency in seven months. The local unit fell 31% to 1,413 naira per dollar on Monday in the so-called NAFEX fixing, the official foreign exchange window, according to data published by FMDQ, which calculates the exchange rate for the West African country.
Company highlights
Pfizer Inc. reported fourth-quarter profit that beat analysts' estimates after the company agreed to allow the U.S. government to return millions of doses of its Covid-19 treatment by the end of 2023.
JetBlue Airways Corp. forecast a worse-than-expected decline in sales this quarter as the company struggles with uneven demand and increased costs. This is a setback for the airline as the fate of Spirit Airlines Inc.'s troubled $3.8 billion acquisition remains unclear.
Saudi Aramco has abandoned a plan to increase its oil production capacity, a huge about-face that will raise questions about the kingdom's view of future demand.
Volkswagen AG is shelving plans to seek outside investors for its battery division after weaker demand for electric vehicles clouds the company's outlook and the industry faces an increasingly daunting reality in the transition to electric vehicles.
Important events this week:
US conference. Consumer Confidence on the Board, JOLTS Vacancies, Tuesday
Microsoft, Alphabet results, Tuesday
China Non-Manufacturing PMI, Manufacturing PMI, Wednesday
Japanese industrial production, retail sales, housing starts, Wednesday
The Bank of Japan will release a summary of opinions from its January policy meeting on Wednesday
Boeing reports earnings Wednesday amid the U.S. government's safety investigation
Federal Reserve interest rate decision and Fed Chairman Jerome Powell's press conference, Wednesday
U.S. Treasury Department Quarterly Refund, Wednesday
China Caixin Manufacturing PMI, Thursday
Eurozone S&P Global Manufacturing PMI, CPI, Unemployment, Thursday
US productivity, construction spending, ISM production, initial jobless claims, Thursday
Apple, Amazon, Meta, Deutsche Bank, BNP Paribas results, Thursday
Bank of England interest rate decision, Thursday
US employment report, University of Michigan consumer sentiment, factory orders, Friday
Some of the key moves in the markets:
Shares
S&P 500 futures fell 0.1% at 7:11 a.m. New York time
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average fell 0.2%
The Stoxx Europe 600 rose 0.3%
The MSCI World Index has hardly changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0841
The British pound fell 0.2% to $1.2678
The Japanese yen was little changed at 147.42 per dollar
Cryptocurrencies
Bitcoin rose 1.1% to $43,666.05
Ether rose 0.6% to $2,319.26
Tie up
The 10-year Treasury yield fell one basis point to 4.06%
The 10-year German government bond yield rose two basis points to 2.25%
The 10-year UK government bond yield fell one basis point to 3.86%
raw materials
This story was produced with support from Bloomberg Automation.
– With support from Divya Patil and Farah Elbahrawy.
(An earlier version of this story corrected the total value of tech companies reported through Thursday.)
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