Nasdaq and S&P 500 futures rise ahead of retail sales release – Invesco QQQ Trust, Series 1 (NASDAQ:QQQ), SPDR S&P 500 (ARCA:SPY)

US stocks are gearing up for a positive start on Tuesday ahead of the release of the key August retail sales report. Traders may crowd the technology sector to take advantage of the recent decline. The market and experts are divided on the magnitude of a rate cut, but a 25 basis point cut could trigger an initial negative reaction. However, most believe that the state of the labor market and economy may take precedence over interest rate developments going forward.

August retail sales could be on traders' radar on Tuesday. Fund managers Louis Navellier said a disappointing report could tip the balance in favor of a larger cut on Wednesday. Wharton professor and senior economist at Wisdom Tree Jeremy Siegel said he would like the Fed to act quickly. But so far the market is comfortable with the key interest rate reaching the three-point mark by the middle of next year, he added.

In premarket trading on Tuesday, SPDR S&P 500 ETF Trust (NYSE: SPY rose 0.38% to $564.99 and the Invesco QQQ ETF (NASDAQ: QQQ) rose 0.58% to $476, according to data from Benzinga Pro.

Notes from the last meeting:

Wall Street ended Tuesday's session with mixed results. Apple, Inc. AAPL That sent the tech-heavy Nasdaq Composite lower, while the S&P 500 and Dow Industrials closed higher. The broader index's positive close extended the index's winning streak to six sessions, with better-than-expected regional manufacturing data providing the boost on a day when it traded below the unchanged line for most of the session.

The S&P 500 Index is now one step closer to its all-time high of July 16 at 5,667.20.

Stocks in the energy, financials, materials and utilities sectors gained ground, while IT stocks faced significant selling pressure.

Insights from analysts:

Despite market expectations of a 50 basis point cut, Morgan Stanley analyst Seth Zimmerman said he expected a more modest 0.25 percent cut. The economist expects the FOMC statement to acknowledge further progress on inflation and risks to the labor market. The dot plot, part of the summary of economic forecasts, will show that the number of cuts this year will be three instead of the previously proposed one.

Chair Jerome Powell While Carpenter will not commit to a specific rhythm for rate cuts, he does indicate that future rate moves will depend on the data, the economist said. Overall, Carpenter expects three rate cuts of 25 basis points each this year.

Chief US equity strategist at Morgan Stanley Michael Wilson believes that labor market/growth data will be more important to equity prices over the next three to six months. If labor market/growth data improves from here, a series of 25 basis point rate cuts by the middle of next year can further support valuations in a “late-cycle” context, he said.

However, he warned that the market could adopt a risk-off stance if labor market data weakens from now on, regardless of whether the Fed initially reaches 25 or 50 basis points.

The best case scenario for equities this week is a 50 basis point cut without any growth concerns or remnants of the unwinding of the yen carry trade, the strategist said, adding that defensives and large caps tend to outperform cyclicals and small caps both before and after the first cut.

See also: How to trade futures

Upcoming economic data:

• The Commerce Department is scheduled to release its retail sales report for August at 8:30 a.m. EDT. Economists on average expect retail sales to decline 0.2 percent from the previous month, erasing some of the 1 percent gain in July. Retail sales excluding autos may have risen 0.2 percent, slower than July's 0.4 percent growth.
• The Federal Reserve's industrial production report, due at 9:15 a.m. EDT, is expected to show a 0.2 percent month-on-month increase in August, following a 0.6 percent decline in July.
• The Commerce Department will release its business inventories report at 10 a.m. EDT. The consensus estimate for July is for steady growth of 0.2% month-over-month.
• The National Association of Home Builders' housing market index is expected to be at 40 for September, up from 39 in July. The index, which measures homebuilder confidence, is scheduled to be released at 10 a.m. EDT.
• The Treasury Department will conduct a 20-year bond auction at 1:00 p.m. EDT.

Stocks in focus:

• Intel Corp. INTC rose over 6% in premarket trading after the company announced an agreement to supply custom artificial intelligence chips Amazon, Inc. Amazon Use AWS.
• Viasat Inc. VSAT fell over 5.60% in response to negative analyst action.
• Microsoft Corporation MSFT rose over 1.50% after the company announced a $60 billion share buyback plan and a 10% dividend increase.

Commodities, bonds and global stock markets:

Crude oil and gold futures eased following Monday's strong gains, with gold holding above the $2,600 mark despite a slight decline and the benchmark 10-year Treasury note down marginally by 3.619% ahead of Wednesday's Fed decision. Bitcoin BTC/USD has exceeded the $59,000 mark.

Global markets rose on expectations of a Fed rate cut, with most major markets in Asia ending the day higher. The Japanese market, which reopened after the holiday on Monday, slipped amid the strength of the yen, and the New Zealand market extended losses following the central bank meeting. Chinese and South Korean markets remained closed for holidays.

European stocks posted significant gains in early trading.

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