U.S. Index Futures Climb Amid Fed Rate Cut Hopes

U.S. index futures saw a modest rise on Tuesday as investors awaited the Federal Reserve's decision on interest rates and scrutinized Big Tech earnings. Microsoft shares fell slightly premarket, while other tech giants saw mixed results. The market's focus is also on upcoming employment reports and a possible rate cut in September.

U.S. index futures edged up on Tuesday as investors looked for signals on the timing of interest rate cuts from this week's Federal Reserve policy decision. Investors were also cautious ahead of Big Tech earnings releases and jobs data for the day.

Microsoft shares dipped by 0.2% in premarket trading, with the company's earnings report due after markets close. However, other tech stocks such as Apple, Amazon, Meta Platforms, Alphabet, and Tesla showed modest gains ranging from 0.4% to 1.6%, while Nvidia slipped by 0.5%.

As of 5:51 a.m. ET, Dow e-minis were marginally up 45 points (0.11%), S&P 500 e-minis rose 5.75 points (0.10%), and Nasdaq 100 e-minis gained 14 points (0.07%). Alphabet's second-quarter results, which failed to meet investors' high expectations, and Tesla's subpar earnings triggered a market downturn last Wednesday, predominantly affecting megacap stocks.

The focus remains on quarterly results from major technology companies, which have significantly bolstered the U.S. stock market's strong performance since the beginning of the year. Investors are assessing whether these companies' high valuations are justified and if AI-driven stock rallies can continue. A crucial employment report is anticipated post-market opening, which, along with Friday's Non-farm Payrolls data, will help investors evaluate the U.S. labor market's condition.

The Labor Department's JOLTS report is expected to reveal around 8 million job openings in June, compared to 8.14 million in May. Improving inflation rates and a softening job market have led investors to expect an interest-rate cut announcement from the Federal Reserve in September. The central bank's policy decision will be disclosed on Wednesday, and any signs of hawkish sentiment could negatively impact equities.

Investors have already factored in a rate cut by September, with CME's FedWatch Tool showing a 90% probability for a 25-basis-point cut. This expectation has driven investors towards mid- and small-cap stocks, moving away from dominating tech giants. The small-cap index is set for its most substantial monthly gain of the year, outperforming the main U.S. stock indexes. Russell 2000 futures were 0.1% higher for the day. The blue-chip Dow is also poised for a strong performance, potentially marking its best month in 2024, given the gains sustain.

Elsewhere, CrowdStrike shares plummeted 5% following news of Delta Air Lines seeking compensation from the cybersecurity firm and Microsoft due to a recent global cyber outage. On the other hand, cloud services provider F5 saw a 14% spike after exceeding fourth-quarter forecast estimates. Robotics vendor Symbotic's shares fell 20% upon disappointing current-quarter revenue and profit projections.

(With inputs from agencies.)