US Stock Futures Stagnate After Severe Declines in Tech Stocks

Summary

  • The state of US stock futures exhibited insignificant fluctuations during the overnight trading of Tuesday, in light of the record-breaking decline since last October.
  • Outback Steakhouse’s parent company, Bloomin Brands Inc, witnessed more than 3% rise after the announcement of adding two new board members.
  • A significant downturn was observed with the onset of the New Year, with pronounced drops in artificial intelligence benefiting companies such as Nvidia and Advanced Micro Devices.
  • The market observed a significant recovery attributed to easing inflation and a reduction in 10-year Treasury yield.

Continuing the trend from Tuesday’s overnight trading, US stock futures displayed minimal activity following the stock market’s steepest decline since October. By 11:30 pm GMT (6:30 pm ET), major indices exhibited negligible changes, with a slight uptick of 0.1% in one of them.

Bloomin Brands’ Board Expansion

The parent company of Outback Steakhouse, Bloomin Brands Inc (NASDAQ:), reported over a 3% upswing post the proclamation of two novel board member incorporation. The step aligns with the company’s preceding agreement with activist investor, Starboard Value.

Beginning of the Year Slump

With the start of the New Year, the stock indices experienced a startling dip – one index lagged by 0.6%, while another barely climbed by less than 0.1%. Furthermore, The Nasdaq Composite observed an over 1.6% drop, signifying its worst performance since October, largely attributed to the fall in prominent tech stocks and close to 4% decline in Apple’s stock (NASDAQ:) following a downgrade by Barclays (LON:).

AI Poised Companies Hit Hard

Companies such as Nvidia (NASDAQ:) and Advanced Micro Devices (NASDAQ:), poised to benefit from AI development, saw marked drops of 2.7% and 6% respectively. Additionally, Alphabet (NASDAQ:) and Microsoft (NASDAQ:), both key players in chatbot technology, suffered losses over 1%. The VanEck Semiconductor ETF (SMH) declined by 3.4%, and Intel (NASDAQ:) recorded a 4.9% decrease.

Long-Term Market Outlook

Market expert, Chris Verrone, discerned during the CNBC’s “Closing Bell: Overtime” on Tuesday that the onus of evidence lies with the bears at the outset of the year. Short-term corrections, he stated, are typical in a market that’s rebounding off of high levels and entering the primary season. He also voiced optimism about the longer-term arrangement forecasting a positive six- to twelve-month horizon.

Remarkable Market Recovery

Following a devastating 2022, the market made an extraordinary recovery with major averages bouncing back notably. The S&P 500 escalated by over 24%, recording its longest weekly winning streak since 2004, while the Nasdaq soared by 43%, marking its best performance since 2020.

Shift Back to Risk Assets

Lower inflation coupled with a drop in the 10-year Treasury yield, which concluded the year under 3.9% after touching 5% in October, drove the switch back into risk assets. The culmination of the Federal Reserve’s aggressive rate increase campaign, expectation of a rate cut in 2024, and increased likelihood of soft landing have fostered an improvement in market sentiment over the past few weeks.

In the bond markets, rates noted were at 3.947%. The forthcoming minutes from the Fed’s December policy meeting coupled with comments from Richmond Fed President Tom Barkin could shed more light on the future rate path before the central bank’s meeting later this month. November’s job openings report and December’s ISM manufacturing data are additional key releases.

With the latest shifts in the market, these economical transitions could potentially impact forex trading and asset valuation, leading investors to reconsider their strategies.

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