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US stock futures decline; tech sector mixed amid rate cut hopes


us stock market analysis, financial news

U.S. stock futures experienced a downturn following a string of record-setting performances on Wall Street. This shift in market sentiment occurred as investors awaited confirmation that central banks, notably the Federal Reserve, might reduce interest rates in the near future.


Despite this overall retreat, certain sectors showed resilience. Notably, semiconductor companies, which had been instrumental in driving recent market gains, witnessed an uptick in premarket trading.


Prominent names in this sector, such as Western Digital Corp., Micron Technology Inc., and Nvidia Corp., saw their stock prices increase by over 1%. However, not all tech giants shared this positive trend. Apple Inc. suffered a decline of about 1% following a substantial €1.8 billion ($2 billion) fine imposed by the European Union.


Similarly, Tesla Inc. experienced a drop after a legal decision by a Delaware judge concerning Elon Musk’s compensation package.



The U.S. stock market had been on a remarkable upward trajectory, with the S&P 500 and other indexes reaching unprecedented heights. This trend was notably highlighted by the S&P 500's performance, which had seen consistent gains over the majority of the past 18 weeks, a streak not witnessed since 1971, as observed by analysts at Deutsche Bank AG.


This rally gained additional momentum following recent U.S. economic data, which seemed to support the likelihood of the Federal Reserve cutting interest rates later in the year. Concurrently, the recent earnings season revealed an average earnings growth of 8% among companies, further buoying market optimism.


Market analysts, such as Jefferies strategist Mohit Kumar, attributed this positive market sentiment to a combination of factors including improved economic outlooks, bullish investor attitudes, and strong corporate earnings.



Kumar emphasized that both the economic forecast and the possibility of supportive actions from central banks (often referred to as a central bank "put") have significantly bolstered investor confidence in riskier assets.


In Europe, stock markets also experienced a pause in their upward trajectory, despite having achieved six consecutive weeks of gains. However, the technology sector within these markets continued to outperform.


In other financial markets, U.S. Treasuries saw a decline, while oil prices remained stable, hovering near their highest levels for the year. This stability in oil prices came in the wake of OPEC+ deciding to maintain its production cuts.


Market expectations regarding the Federal Reserve's policy adjustments have seen a shift, with the anticipation of easing measures now moved to July from the previously expected May.

Despite this, Kumar maintains a forecast of a substantial reduction in interest rates, predicting cuts between 75 to 100 basis points within the year.



Key insights into the future of monetary policy might emerge from upcoming events. These include the testimony of Fed Chair Jerome Powell before Congress and a policy meeting of the European Central Bank scheduled for Thursday.


Additionally, a variety of economic data releases, including U.S. monthly payroll figures due on Friday, are expected to provide further clarity on economic conditions.


In the European market, Delivery Hero SE experienced a rise after announcing its plans to modify and extend its financing facilities. Meanwhile, in Asia, Taiwan Semiconductor Manufacturing Co., the world's leading chipmaker, reached its highest-ever stock price level. Source: Bloomberg


04.03.2024



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