U.S. equity-index futures were again lower after the previous session saw high-flying technology stocks suffer a sell-off amid concerns the recent rally has come too far too fast.
How are stock-index futures trading
-
S&P 500 futures
ES00,
-0.18%
dipped 9 points, or 0.2% to 4778 -
Dow Jones Industrial Average futures
YM00,
-0.13%
fell 55 points, or 0.1% to 37938 -
Nasdaq 100 futures
NQ00,
-0.32%
eased 56 points, or 0.3% to 16664
On Tuesday, the Dow Jones Industrial Average
DJIA
rose 26 points, or 0.07%, to 37715, the S&P 500
SPX
declined 27 points, or 0.57%, to 4743, and the Nasdaq Composite
COMP
dropped 245 points, or 1.63%, to 14766.
What’s driving markets
Traders appeared cautious early Wednesday as they parsed the reasons for why the new year got off to a bad start for many of 2023’s big winners.
“Global markets faltered on the first day of trading in the new year, as investors took time for reflection after a breathless end to 2023,” said Richard Hunter,
The Nasdaq Composite Index
COMP,
which is heavily weighted with technology stocks, surged 43% last year, with a large chunk of that coming in the last two months, as investors made bets that easing inflation will allow the Federal Reserve to cut borrowing costs swiftly in 2024.
Hopes that companies like Microsoft
MSFT,
and Nvidia
NVDA,
will benefit from AI adoption also powered the rally.
However, the first trading day of the year on Tuesday saw the Nasdaq Composite
COMP
shed 1.6%, it’s biggest drop in more than two months, and the broader S&P 500
SPX
fall 0.6%.
The cause of the pullback — which marked the Nasdaq’s fourth worst start to a year in its history, according to Bespoke Investment — was still being debated as the new session progressed.
A downgrade of Apple
AAPL,
the market’s biggest constituent, from neutral to underweight by Barclays, did not help the mood, particularly as it touched a nerve that some big-tech valuations appeared stretched and the market looked overbought following a nine-week winning streak.
Geopolitical tensions also are continuing to take a toll amid fears of naval conflict in the Red Sea and following news of the assassination in Lebanon of a senior Hamas leader.
And investors remain wary of a move higher in Treasury yields, which is continuing on Wednesday, with the 10-year note
BX:TMUBMUSD10Y
up to 3.985% having traded around 3.80% just last week.
The rebound in yields reflects growing skepticism about the chance of near-term interest rate cuts by the Federal Reserve, according to Henry Allen, analyst at Deutsche Bank.
“Clearly, investors are still pricing in a Q1 rate cut as more likely than not, but there’s been a bit more doubt over the last 48 hours as to whether the aggressive rate cuts priced for 2024 will actually end up happening,” said Allen.
With the Fed’s policy trajectory in mind investors will be keen to see the minutes from its December meeting, due to be released at 2 p.m. Eastern. Richmond Fed President Tom Barkin is due to speak before that at 8:30 a.m.
U.S. economic updates set for release on Wednesday include the job openings, or JOLTS, survey for November, alongside the December ISM manufacturing report, both due at 10 a.m. Eastern.
