Dow Jones tipped to reach new highs, while Nasdaq called lower pre-NFP report
US stock futures were mixed ahead of the final trading session before the Independence Day long weekend, with the key non-farm payrolls report brought forward to Thursday.
Dow Jones futures up 0.2%, the S&P 500 little changed and Nasdaq futures down 0.3% as investors weighed the outlook for interest rates and the AI trade.
The caution followed a weak session on Wall Street overnight, when the Nasdaq fell 0.7% to 26,040.03 as semiconductor and AI-related stocks came under renewed pressure.
The S&P 500 slipped 0.2% to 7,483.23, while the Dow ended little changed, down 0.03% at 52,305.24 after hitting a record intraday high just above 52,742.
The latest wobble in the AI trade was led by Caterpillar, which plunged 7% after investor Michael Burry disclosed a bearish position in the stock. The move wiped 437 points off the Dow and rippled across the broader AI ecosystem.
Kenny Polcari at Slatestone Wealth said Caterpillar has become “one of Wall Street’s newest AI beneficiaries”, with investors betting on its exposure to data centre construction, power generation and grid expansion. But at 37 times forward earnings, against an industry average closer to 15 times, he said the shares had become “a bit extended” and were vulnerable to profit-taking.
The sell-off in chipmakers rippled into Asia, with South Korea’s Kospi tumbling 8%.
Oil prices also eased, with WTI crude down more than 2% to just above $67 a barrel, its lowest level since late February, after Qatar reported progress on shipping through the Strait of Hormuz.
Investors also took comfort from softer inflation signals, with yesterday’s ISM prices paid index falling below forecasts.
This pointed to easing cost pressures for manufacturers ahead of today’s June non-farm payrolls report, due at 8.30am Eastern time.
The Street consensus is for the US economy to have added 110,000 jobs last month, down from 172,000 in May, while the unemployment rate is forecast to remain at 4.3%.
“The jobs data will help guide market pricing for US rates in light of the newly hawkish FOMC,” said market analyst Neil Wilson at Saxo.
He argued that “the regime shift to a more forceful and proactive Fed has only just begun”, with Treasury yields climbing in recent days after Fed chair Kevin Warsh reiterated his commitment to restoring price stability and promised “a good family fight” at this month’s policy meeting.
The dollar weakened overnight, with the DXY index falling back below 101 after touching 101.30 on Wednesday.
Analyst David Morrison at Trade Nation said traders were taking profits after the greenback’s recent rally, with the Japanese yen the biggest beneficiary amid speculation Tokyo could intervene in currency markets during the US holiday.
Morrison said traders may also be positioning ahead of payrolls, with a strong jobs report likely to revive dollar buying by reinforcing expectations of further Federal Reserve rate increases, while a weaker reading could offer some relief to the yen.