Stock futures flat after major averages’ seven-week rally

Futures tied to the Dow industrials gained 34 points, or 0.1 per cent, the S&P 500 futures rose 0.1 per cent, while Nasdaq 100 futures added 0.02 per cent

U.S. stock futures traded near the flatline Sunday night after the three major averages notched their seventh successive week of gains. The Dow Jones Industrial Average logged a new intraday record, and the Nasdaq 100 had a new closing high.

Futures tied to the Dow industrials gained 34 points, or 0.1 per cent. The S&P 500 futures also rose 0.1 per cent, while Nasdaq 100 futures added 0.02 per cent.

The winning streak for the S&P 500 marked its longest streak of weekly gains since 2017. The broad market index is 3.3 per cent higher for the month, while the Dow and Nasdaq are 3.8 per cent and 4.1 per cent higher, respectively.

Investor sentiment took a positive turn last week after the Fed indicated three short-term interest rate cuts are expected in 2024 amid cooling inflation.

Declining inflation, low growth expectations, and intact growth momentum is a great combination from a market perspective. We have argued time and again that this is a backdrop that is as Goldilocks as it gets, HSBC chief multi-asset strategist Max Kettner wrote in a Friday note.

Kettner noted, nevertheless, that near-term growth and earnings expectations in the U.S. remain weak. The current winning streak seems similar to the 2017-2018 market rally, Kettner added, where broadly bullish sentiment gave way to disappointment in January “by the blow-up in implied equity market volatility.”

So, for the first time in H2, we are starting to be wary of the positive momentum. It may be prudent to start 2024 on a more cautious note, he added.