US futures keep more muted awaiting big day ahead
The overall market mood remains tense amid a lack of fresh catalysts from the US-Iran conflict. Talks between the US and Iran remain gridlocked, with both sides not able to come to terms on how to get back to the negotiating table. That led to some nervousness in trading yesterday already with the S&P 500 falling by 0.5% and Nasdaq down 0.9%.
So far today, tech shares are keeping steadier but there’s not too much in it. S&P 500 futures are flat while Nasdaq futures are just marginally higher by 0.2%. Looking to the day ahead, there is going to be much to play for in US trading later.
The key risk event on the economic calendar is the FOMC meeting. The Fed is expected to keep interest rates unchanged though, playing for time in assessing how to go about the uncertainty from the Middle East conflict.
As the war drags on for longer, major central banks remain paralysed in trying to avoid making a policy misstep. It is good to be reminded that central banks are dealing with now is a massive supply shock. And with that in mind, monetary policy is very much ill-equipped to be dealing with that. Raising interest rates will do nothing to resolve the situation in the Strait of Hormuz.
So, the playbook right now is all about buying time. But as inflation expectations rise and surging energy prices start to have a more profound impact on the economy and inflation outlook, how long can policymakers afford to wait? That’s the key question now.
The language from the Fed today is going to be the key thing to watch for as such. That will set the mood for risk trades, barring any headline risks to follow from the US-Iran conflict.
All this before we get to major tech earnings after the closing bell later in the day.
It is going to be a blockbuster day with four of the 'Magnificent Seven’ set to report. Alphabet, Amazon, Meta, and Microsoft are all slated to deliver their latest earnings snapshot before Apple rounds things off tomorrow.
So even if investors might feel jittery from the lack of progress in US-Iran talks and potential Fed messaging, there’s still a safety net to fall back on. That provided big tech can come to the rescue once again and deliver against lofty AI expectations.
I put up a light preview on that earlier here.
This article was written by Justin Low at investinglive.com.