Nasdaq Index, Dow Jones, S&P 500 News: Flexible Fed, Bank Earnings Propel Futures

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Bank Earnings Exceed Expectations

Bank of America’s shares rose over 2% in pre-market trading after reporting earnings that surpassed analyst forecasts. Similarly, Morgan Stanley topped expectations, although its shares slipped slightly. These results signal a promising start to the new reporting season.

Small-Cap Stocks Gain Traction

The market is witnessing a rotation into small-cap stocks, with the Russell 2000 rising 1.8% on Monday. Tom Lee of Fundstrat Global Advisors predicts this rally could extend for 10 weeks, potentially yielding gains of up to 40%. Lee cites comparatively oversold conditions and lower valuations as key drivers for this trend.

Fed Signals Flexibility on Rate Cuts

Federal Reserve Chair Jerome Powell indicated that the central bank won’t wait for inflation to hit 2% before considering rate cuts. Instead, the Fed will look for “greater confidence” that inflation is trending towards the target. This stance suggests a more flexible approach to monetary policy adjustments.

Tech Giants Face Challenges and Opportunities

General Motors CEO Mary Barra announced uncertainty in meeting the company’s 1 million EV production capacity target in North America by 2025, citing slower market development. Meanwhile, Apple released a public beta version of iOS 18, showcasing new user interface elements and redesigned core apps, signaling potential growth in its software ecosystem.

Economic Data in Focus

Investors are eagerly awaiting June retail sales data, with economists projecting a 0.4% decline from May. Excluding auto sales, a slight increase of 0.1% is anticipated. Additional data on import prices and the housing market will provide further insights into economic conditions.

Market Forecast

The positive earnings reports from major banks and the Fed’s flexible stance on rate cuts paint a bullish short-term outlook for the market. The rotation into small-cap stocks could provide additional upside potential. However, investors should remain cautious and monitor upcoming economic data releases, which could influence market sentiment and trading decisions in the coming days.

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