U.S. stock futures were little changed Thursday night after the S&P 500 had its worst session since April, dragged lower by investors’ rotation out of megacap tech stocks.
S&P 500 futures were marginally higher. Futures linked to the Dow Jones Industrial Average were up around 0.1%, while Nasdaq 100 futures traded near the flatline.
During the main trading session, the broad market index closed 0.88% lower, and the tech-heavy Nasdaq Composite lost 1.95%. Both indexes broke seven-day winning streaks and they suffered their worst day since April 30. Investors sold their Big Tech winners, pushing Nvidia lower by 5.6% and leading to a 4.1% decline for Meta Platforms. The 30-stock Dow was the outperformer among the three major averages, inching higher by 0.08%.
On a weekly basis, the Dow is also beating the other two major averages, up nearly 1%. The S&P 500 is up 0.3% through Thursday’s close, while the Nasdaq is down nearly 0.4%.
Investors’ move out of tech stocks on Thursday was spurred by a consumer price index report that showed a 0.1% monthly decline in June. Traders flocked to areas of the market that will benefit from Federal Reserve interest rate cuts, including small-cap stocks. Indeed, the Russell 2000 jumped about 3.6%.
The market rotation during the session is “a taste of what’s going to happen the second half of the year,” Warren Pies, strategist and co-founder of 3Fourteen Research, said on CNBC’s “Closing Bell.”
The upcoming corporate earnings season and a credit expansion narrative will power the market to the end of the year, he added.
“We’ve had a pretty strong economy in a lot of ways over the last few years, but there are pockets that are really restrained by Fed interest rate policy,” Pies said. He noted that as central bank policymakers cut rates, corners of the economy that have been “dormant,” such as existing home sales and new auto sales, will “reawaken.”
Several financial services giants are set to report earnings Friday morning. JPMorgan Chase, Wells Fargo and Citigroup are all scheduled to post their quarterly results before the bell.
On the economic front, traders will be looking toward June’s producer price index results. July’s preliminary consumer sentiment numbers from the University of Michigan are also due.
Small caps to have a difficult earnings season, Michael Kantrowitz says
Investors shouldn’t be chasing after small caps, according to Piper Sandler’s Michael Kantrowitz. The firm’s chief investment strategist says the move in the Russell 2000, which popped about 3.6% in Thursday’s session, is a knee-jerk reaction.
“What’s leading today is rate-sensitives and risk, low quality,” he told CNBC’s “Power Lunch.” “The issue with buying low quality and risk is that when earnings season comes, and particularly because we’ve seen bad macro news, rising unemployment, softer inflation, you’re going to get earnings misses.”
The strategist thinks other sectors such as utilities or emerging markets are more beneficial in the current macro environment. With the consumer price index falling 0.1% from May, he thinks inflation is “old news.”
“It’s time to look beyond inflation, and I think the market is finally there,” he continued.
— Sean Conlon
Regional bank stock ETF surged the most on Thursday since March
Whether because of a better inflation report, a bond market rally that lowered fixed income yields, a less inverted yield curve or the brighter outlook that the Federal Reserve will soon start lowering interest rates, a regional bank stock exchange-traded fund on Thursday scored its best one-day advance since March 5.
The SPDR S&P Regional Banking ETF climbed 4.21% on Thursday, bringing this week’s gain to 8.41%. The S&P Composite Regional Bank index jumped 3.75% Thursday and is up 7.60% this week.
But a host of individual banks outperformed those benchmarks by wide margins. Eagle Bancorp of Bethesda, Maryland, jumped 7.4% Thursday. Brookline Bancorp outside Boston and ServisFirst Bancshares of Birmingham, Alabama, both surged 7.1%. Valley National Bancorp in suburban New Jersey climbed 7% and Tompkins Financial Corporation in Ithaca, New York, added 6.8%.
So far this week, Valley National has risen 13.7%, Eagle Bancorp is up 13.3%, Tompkins Financial is ahead 10.7%, ServisFirst by 10.4% and Brookline by 10.3%.
— Scott Schnipper
Private aviation company Wheels Up surges 20% as Russell 2000 jumps
The Russell 2000 had a big day, closing higher by nearly 3.6% as investors rotated into small-cap stocks. Wheels Up, a member of the index, saw its shares jump more than 20%.
Wheels Up, a provider of on-demand private flight services, is also enjoying a 111% gain in July, tracking for its best month ever.
Delta Air Lines is the largest shareholder of the company, holding 38% of its shares as of the end of March, according to FactSet.
Fellow Russell 2000 member Joby Aviation also caught a tailwind, rising 19.7% in Thursday’s trading. It was the best session for the stock since June 28, 2023.
— Darla Mercado, Gina Francolla
Stock futures open little changed Thursday
U.S. stock futures were little changed Thursday night.
S&P 500 futures were marginally higher. Futures linked to the Dow Jones Industrial Average and Nasdaq 100 futures were up less than 0.1% each.
— Hakyung Kim