Futures muted as Big Tech results, Fed decision inch closer

[July 30, 2024]  (Reuters) - U.S. index futures edged up on Tuesday, as investors hoped for clues on the timing of interest-rate cuts from this week's Federal Reserve monetary policy decision, while caution crept in ahead of the day's Big Tech earnings and jobs data.

Microsoft shares were down 0.2% in premarket trading. The company is set to report after markets close.

Other megacaps such as Apple, Amazon.com, Meta Platforms, Alphabet and Tesla were up between 0.4% and 1.6%, while Nvidia was down 0.5%.

At 5:51 a.m. ET, Dow e-minis were up 45 points, or 0.11%, S&P 500 e-minis were up 5.75 points, or 0.10%, and Nasdaq 100 e-minis were up 14 points, or 0.07%.

Alphabet's second-quarter results beat, which failed to impress investors and knocked down the Google owner's shares last week, underscored Wall Street's high earnings bar for tech giants. Coupled with Tesla's disappointing results, Alphabet's earnings induced a broad-based market slump on Wednesday, largely dragged down by megacap stocks.

All eyes are on quarterly results from technology behemoths, which have largely supported the U.S. stock market's record-breaking run since the start of the year, to see if their over-stretched valuations are justified and the stocks have the potential for further AI-led equity rallies.

A key employment report is also due after markets open. Along with Friday's Non-farm Payrolls reading, this is expected to help investors size up recent data signaling a loosening U.S. labor market.

The Labor Department's Job Openings and Labor Turnover Survey is expected to show 8 million job openings in June, down from 8.14 million in May.

The continued improvement in inflation and an easing jobs market have bolstered investor expectations of the Federal Reserve signaling an interest-rate cut in September. The central bank will announce its policy decision on Wednesday and any hawkish commentary could sharply weigh on equities.

Investors have fully priced in a rate cut by September, with the odds of a 25-basis-point cut holding around 90%, according to CME's FedWatch Tool.

A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 7, 2024. REUTERS/Brendan McDermid/File Photo

Hopes of an early start to monetary policy easing have prompted an investor run to mid- and small-cap stocks lately, away from megacap tech shares, whose sheer dominance in the U.S. stock market has drawn scrutiny.

The small-caps index is on track to log its biggest monthly jump since the start of the year and is poised to sharply outperform the three major U.S. stock indexes. Futures tracking the Russell 2000 were up 0.1% on the day.

Benefiting from the recent funds rotation into underperforming sectors, the blue-chip Dow is also set for its best month in 2024, if gains hold.

Among other single movers, CrowdStrike dropped 5% after a report that Delta Air Lines sought compensation from the cybersecurity firm and Microsoft for the global cyber outage earlier this month.

Cybersecurity and cloud services company F5 jumped 14% after forecasting fourth-quarter results above estimates.

Symbotic slumped 20% after the robotics vendor forecast current-quarter revenue and adjusted core profit below estimates.

(Reporting by Ankika Biswas in Bengaluru; Editing by Pooja Desai)

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