US Stock Futures Giving Mixed Signals Pulling Back from Record Highs


Chinese crackdown on tech and education companies put pressure on Asian indices. On the other hand, the US tech giants continue to post stellar returns in the second-quarter earnings season.

During the early morning trading on Wednesday, the US stock futures showed mixed signals with major averages pulling back from record high levels. The futures for the Dow Jones Industrial Average (DJIA) is showing a minor dip.

On the other hand, the futures for S&P 500 and Nasdaq 100 are trading in positive territory. On Wednesday, the Dow Jones dipped 0.24% and the S&P 500 dipped 0.47%. However, the tech-heavy Nasdaq Composite tanked 1.21% registering its worst performance since May 12.

Besides, the ongoing crackdown by China on tech and education companies triggered a sell-off in Asian markets. In a note to clients, TD Securities wrote:

“Risk sentiment is on edge as pressure continues in Chinese equities. This comes at an inopportune time as markets are digesting the pervasiveness of a growth scare”.

Bumper Results from Tech Giants and Record Stock Levels

On Tuesday, the tech giant reported bumper results for the second quarter of 2021. Smashing way above the market estimates, tech giant Apple Inc (NASDAQ: AAPL) announced a 50% jump in iPhone sales year-over-year. On the other hand, Google-parent Alphabet Inc (NASDAQ: GOOGL) also posted its Q2 results.

Alphabet announced a massive 69% surge in its advertising revenue. At the same time, computing giant Microsoft Corp (NASDAQ: MSFT) managed to beat earnings estimates despite the drop in revenue from its Windows division. This has turned out to be one of the busiest weeks of earnings on Wall Street.

Later today, giants like Qualcomm Inc (NASDAQ: QCOM), Facebook Inc (NASDAQ: FB), McDonald’s (NYSE: MCD), Pfizer Inc (NYSE: PFE), Ford Motor Company (NYSE: F), and PayPal Holdings Inc (NASDAQ: PYPL) shall announce their Q2 results. From the S&P 500 companies reporting their quarterly earnings, over 89% have topped the earning’s estimates. Also, data from Refiitiv shows that 86% of companies have exceeded revenue expectations.

Despite the recent pullback, all three Wall Street indices are trading in positive for the month of July. In a note to clients, Swiss financial giant UBS wrote:

“While the delta variant has the potential to spark renewed short-term volatility, we do not think it will pose a major threat to the bull market. Overall, we remain optimistic about the outlook for the economy.”

Review of the Monetary Policy

On Tuesday, the US central bank – Federal Reserve – kicked off the review of monetary policy. Later today, the Federal Open Market Committee will release a statement along with a briefing from chairman Jerome Powell. LPL Financial Fixed Income Strategist Lawrence Gillum told CNBC:

“We’re not expecting fireworks at this Fed meeting. But we are expecting the committee to go further down the road in discussing the when and how to start removing the emergency level monetary accommodation it has been providing markets.”

On Tuesday, the IMF cautioned that the inflation fears could be real and more than just being transitory in nature. Powell is most likely to address the briefing today in this regard.

“We expect Jay Powell to reiterate that the tapering discussion is underway, but that it’s too soon to reveal a specific date on when the initial curtailment of asset purchases will begin. We expect Jay Powell to acknowledge persistent supply chain disruptions as a key cause of inflation, but we also expect him to highlight examples of specific sectors that have seen relief on the cost front, such as lumber and iron ore,” Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence said.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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