Stock-index futures edged higher Wednesday, as global equities rose amid optimism over trade and expectations for additional central-bank stimulus
How are the major benchmarks performing?
Futures on the Dow Jones Industrial Average YMU19, +0.20% rose 44 points, or 0.2%, to 26,938, while S&P 500 futures ESU19, +0.18% were up 3.75 points, or 0.1%, at 2,982.25. Nasdaq-100 futures NQU19, +0.21% gained 14 points, or 0.2%, to 7,829.50.
The Dow DJIA, +0.28% saw its fifth straight gain Tuesday, rising 73.92 points, or 0.3%, to end at 26,909.43 — marking its longest winning streak since a six-day run that ended on June 10. The S&P 500 SPX, +0.03% eked out a gain of 0.96 point to end at 2,979.39, while the Nasdaq COMP, -0.04% shed 3.28 points, or less than 0.1%, to close at 8,084.16
What’s driving the market?
While markets have appeared calm on the surface, a heavy internal rotation continued Tuesday as investors dumped previously market-leading momentum shares in favor of previously out-of-favor value stocks. Momentum strategies focus on buying shares that have previously gained and have offered outsize returns for much of the current bull market, while value shares have lagged behind.
Tuesday’s action saw the iShares Edge MSCI USA Momentum Factor ETF MTUM, -1.48% fall 1.5%, while the iShares Edge MSCI USA Value Factor ETF VLUE, +1.41% rallied 1.4%. So far this week, MTUM is down 3.1% versus a 3.2% rise for VLUE.
Small-cap shares have also rallied, with the Russell 2000 RUT, +1.23% rising 1.2% Tuesday to give it a 2.5% rise so far this week versus a largely flat performance for the large-cap S&P 500.
“From a technical perspective, the rally in small-caps is the most important development of the week, so far, as the Russell 2000 hit a five-week high outperforming its large-cap peers,” said Ken Berman, strategist at Gorilla Trades, in a note.
The Russell 2000 has lagged behind the broader market for several months and remains more than 10% below its all-time high despite a recovery over the past couple of weeks, he said, noting that this weeks’ move has seen it move back above both its 50- and 200-day moving averages — viewed as measures of short and longer-term momentum, respectively — for the first time since late-July. If the Russell remains “relatively strong,” major indexes could be on track for a round of all-time highs, he said.
Meanwhile, Treasury prices remained under pressure Wednesday, driving up yields, after an August rally. The rebound in yields reflected easing worries over the U.S.-China trade battle, at least for now, as officials from both countries prepare for renewed talks. Helping boost sentiment Wednesday was a Chinese decision to exempt some products from retaliatory import tariffs announced in August.
Investors are also looking for the European Central Bank to deliver an interest rate cut and potentially other measures when policy makers meet Thursday, while the Federal Reserve is expected to deliver another rate cut when it meets next week.
President Trump renewed his calls for the Federal Reserve to aggressively cut interest rates, arguing that the Fed Funds rate should be cut “to zero or less.”
The U.S. economic calendar on Wednesday features the August producer-price index at 8:30 a.m. Eastern Time, which is forecast to come in flat after a 0.2% July rise. July wholesale inventories are due at 10 a.m.
Which stocks are in focus?
Shares of GameStop Corp. GME, +6.93% tumbled 18.1% in off-hours trade after the video-game retailer reported a second-quarter loss of more than $400 million Thursday evening, driven largely by a $363.9 million goodwill impairment charge, while missing expectations for earnings and sales when excluding the one-time cost.
Amazon.com Inc. AMZN, -0.59% stock could be in focus Wednesday, after a report that the FTC is investigating Amazon’s third-party seller marketplace to determine whether it is using its market power to harm competition.
How are other markets trading?
The yield on the 10-year U.S. Treasury note rose 1 basis point to 1.71% Wednesday, extending a two day sell off. The 10-year yield has risen 10.2% week-to-date.
In commodities markets, the price crude oil rose 1.3% to about $58 a barrel, on weekly data showing a drop in U.S. inventories, while gold prices edged 0.1% higher to around $1500 an ounce. The U.S. dollar, meanwhile, edged higher against a basket of its peers.
In Asia overnight Wednesday, stocks were mixed, with the China CSI 300 losing 0.7%, while Hong Kong’s Hang Seng index added 1.8% and Japan’s Nikkei 225 rose 1%. European shares were trading higher Wednesday, with the Stoxx Europe 600 up 0.8%.
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