Dow Jones futures gain as defensive and blue-chip stocks show relative strength
- US futures indices remain mixed as fluctuating crude prices drive inflation fears.
- Defensive blue-chips like Coca-Cola, Procter & Gamble, and Walmart gained, offsetting losses in tech and cyclical manufacturing stocks.
- Markets await housing metrics, Fed official commentary, and Wednesday’s crucial CPI inflation report for rate signals.
Dow Jones futures rise by 0.61% to trade near 52,430 during European hours on Tuesday. S&P 500 futures remain steady around 7,850, while Nasdaq 100 futures fall 0.56% to near 30,730.
US stock futures trade mixed on Tuesday as ongoing volatility in crude oil prices, driven by geopolitical tensions in the Middle East, continued to weigh on inflation expectations and industrial sector margins. Defensive and blue-chip names such as Coca-Cola, Procter & Gamble, and Walmart showed relative strength within the indices, helping offset softness in tech stocks and cyclical manufacturing components.
Market participants are bracing for the official kick-off of the third-quarter earnings season, with major financial institutions leading the way. Wall Street heavyweights JPMorgan, Goldman Sachs, Citigroup, and Wells Fargo are all scheduled to report their latest quarterly results today, offering crucial insights into consumer health and corporate profitability.
In addition to corporate earnings, investors are evaluating fresh economic indicators, including existing home sales data and scheduled remarks from Federal Reserve (Fed) officials Christopher Waller, Tom Barkin, and Susan Collins. These updates arrive just ahead of Wednesday’s September inflation report, which is expected to play a key role in shaping the Fed’s upcoming interest rate decision.
This mixed futures activity follows a divergent US regular session on Monday, where the Dow Jones Industrial Average managed a 0.38% gain. Conversely, the S&P 500 and the tech-heavy Nasdaq Composite slipped by 0.06% and 0.44%, respectively, as elevated bond yields and a pullback in semiconductor shares pressured broader market sentiment.
US equity breadth stays resilient as equal-weighted index outperforms
Analysts at Danske Bank point out that underlying participation in the latest session remained robust, noting that “despite the marginal decline in the S&P 500, 321 constituents advanced versus 179 that declined, marking the seventh session in eight with positive breadth and another day of outperformance for the equal-weighted index.” They suggest this pattern of sustained breadth and equal-weighted strength continues to challenge the notion that recent Us equity performance has been narrowly driven.
AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.