Stocks and Futures Struggle Ahead of Key US Economic Data

Infotrading.io - US equity-index futures slipped on Thursday, reflecting investor apprehension as they await crucial economic data that could influence Federal Reserve policy. The disappointing sales outlook from Micron Technology Inc. has underscored the risks associated with relying heavily on artificial intelligence (AI) chip makers to drive stock rallies.

Key Factors Influencing Market Sentiment

Investors are closely monitoring a series of US economic data releases that are expected to set the course for Federal Reserve policy. Fed Governor Michelle Bowman's recent comments tempered market expectations for interest rate cuts, contributing to the cautious market sentiment. Treasury yields maintained their recent rise, and the US dollar hovered near an eight-month high.

Andrew Brenner, head of international fixed income at NatAlliance Securities LLC, emphasized the central role of the Fed, stating, "It’s all about the Fed — higher for longer is keeping the front end of rates very high, drawing money into the US and keeping the dollar strong."

Global Market Reactions

European stock benchmarks remained largely unchanged, with traders in a holding pattern ahead of Sunday’s French elections. Notable market movements included a 14% slump in shares of fashion retailer Hennes & Mauritz AB after missing profit and sales estimates, and a decline in GSK Plc shares following a regulatory setback for its blockbuster RSV vaccine.

Asian markets also experienced declines, with stocks in Japan, Hong Kong, South Korea, and China all falling. The MSCI Asia Pacific gauge was on track for its first loss in three days. The yen partially recovered from Wednesday’s significant drop, which saw it tumble to 160.87 per dollar, its weakest level since 1986.

The MSCI China Index faced a technical correction, dropping as much as 2% on Thursday and marking a 10% decline from its May 20 high. Traders struggled to find catalysts ahead of a July meeting of China’s top leaders.

Micron Technology's Impact on the Market

Micron Technology shares fell in extended US trading after the company’s sales outlook disappointed investors who had hoped to benefit from the AI computing boom. This news had a ripple effect, dragging down other chipmakers, including industry giant Nvidia Corp.

Wall Street's recent efforts to diversify beyond megacap stocks have been short-lived. Various measures indicate that market breadth remains weak, exacerbating uncertainty about the sustainability of the current rally. According to Bloomberg Intelligence, the bifurcation between the S&P 500 performance and breadth has reached one of the worst levels in three decades.

Commodity Markets

In commodities, gold steadied after a two-day decline, while oil traded within a narrow range as markets awaited the next round of US economic data.

As markets brace for significant US economic data, the interplay of Fed policies, corporate performance, and global economic conditions continues to shape investor sentiment. The coming days will be critical in determining the direction of equity-index futures and broader market trends.