Megacaps, chip stocks lift futures before Powell testimony
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[July 09, 2024] By
Lisa Pauline Mattackal and Ankika Biswas
(Reuters) -U.S. stock index futures rose on Tuesday, with semiconductor
and megacap technology stocks set to prolong Monday's rally as investors
awaited comments from Federal Reserve chair Jerome Powell for clues on
the central bank's monetary policy path.
The S&P 500 and the Nasdaq inched upwards to close at record highs on
Monday, lifted by the rally in chip stocks as the Philadelphia
semiconductor index rose to a more than two-week high.
That marked the 35th time this year the benchmark index has set a fresh
closing record, as sharp gains in AI-linked and other tech shares have
kept equity sentiment bright, offsetting the uncertainty around the
Fed's rate-cut plans.
Intel shares leapt 3.2% in premarket trading after jumping over 6% on
Monday, while AI-chip favorite Nvidia and Marvell Technology gained over
1% each.
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Investors will scrutinize Powell's Congressional testimony later in the
day to gauge how the central bank is assessing recent economic data that
points to a slowdown in the labor market, amid other signs of potential
economic weakness. The testimony, followed by questions from lawmakers,
is scheduled to start at 10 a.m. ET.
"We expect Mr. Powell's comments in the Q&A to be either balanced or
slightly dovish, given the resumption in progress on disinflation and
signs that economic activity and employment are slowing, albeit
gradually," analysts at Unicredit said in a note.
Policymakers' own projections show an expectation of just one rate cut
this year, but markets have stuck to pricing in 50 basis points of
easing, seeing a nearly 74% chance for a 25 bps cut at the Fed's
September meeting, according to CME's FedWatch.
Those bets have risen from under 50% a month ago.
Rate-sensitive megacap stocks Microsoft, Amazon.com, Alphabet and Meta
Platforms were up between 0.3% and 0.5%.
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Traders work on the floor at the New York Stock Exchange (NYSE) in
New York City, U.S., July 3, 2024. REUTERS/Brendan McDermid/File
photo
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"The market is continuing on a bull run and, with the prospects of
rate cuts, I believe may continue for a while," said WisdomTree
senior economist Jeremy Siegel.
Crucial inflation data is also due this week. Thursday's consumer
price index and Friday's release of the producer price index numbers
will provide insights into whether inflationary pressures in the
world's largest economy are easing.
Investors are also looking ahead to the start of the second-quarter
corporate earnings season this week, with big banks reporting on
Friday.
Analysts, on average, see S&P 500 companies increasing their
aggregate earnings per share by 10.1% in the second quarter, up from
an 8.2% increase in the first quarter, according to LSEG I/B/E/S
data.
At 7:12 a.m. ET, Dow e-minis were up 30 points, or 0.08%, S&P 500
e-minis were up 12.5 points, or 0.22%, and Nasdaq 100 e-minis were
up 77.25 points, or 0.37%.
Among single movers, Tempus AI jumped 5.2% after multiple brokerages
including J.P.Morgan and Morgan Stanley initiated coverage of the
stock with bullish ratings.
Eli Lilly <LLY.N> gained 0.4% after a data analysis report published
on Monday showed its treatment Mounjaro leads to faster and greater
weight loss than Novo Nordisk's obesity drug, Wegovy.
(Reporting by Lisa Mattackal and Ankika Biswas in Bengaluru; Editing
by Pooja Desai)
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