Dow, S&P 500 Futures Mixed As Traders Await Clarity: Why This Strategist Is Skeptical Of Return to 'Goldilocks' Market

U.S. stocks could see listlessness on Thursday as they strive to make a comeback from the previous session's sharp sell-off. Traders are likely to keep a close watch on bond yields and any tariff-related announcement while staying focused on a couple of manufacturing activity readings and job market data.

As of 10:28 p.m. ET on Wednesday, the S&P 500 and Nasdaq 100 futures were up 0.13% and 0.03%, respectively, while the Dow and Russell 2000 futures edged down. 

West Texas Intermediate (WTI) crude oil futures retreated from above $63 a barrel amid reports that the U.S. and Iran will hold a fresh round of talks to strike a nuclear deal and a rise in weekly U.S. inventories. 

Gold futures added more luster and traded past the $3,330-an-ounce mark amid renewed geopolitical concerns.

The 10-year Treasury note slipped overnight after its yield came precariously close to the 4.6% level on Wednesday.

Asian markets were mostly lower early Thursday, tracking the negative sentiment from Wall Street overnight.

The chief among the Main Street catalysts for Thursday are the customary weekly jobless claims report (8:30 a.m. ET) and S&P Global's flash manufacturing and services purchasing managers' indices for May (9:45 a.m. ET). 

The Commerce Department is due to release the April existing home sales report at 10 a.m. ET.

New York Federal Reserve President John Williams will publicly appear at 2 p.m. ET.

The spotlight is also on the earnings reports from Advance Auto (AAP), Analog Devices (ADI), ATS Corp. (ATS), BJ's Wholesale (BJS), Ralph Lauren (RL), Williams-Sonoma (WSM), Autodesk (ADSK), Deckers Outdoor (DECK), Intuit (INTU), Lions Gate Entertainment (LGF.A), Ross Stores (ROST) and Workday (WDAY).

Stocks fell sharply on Wednesday as a surge in bond yields on the back of geopolitical tensions and concerns about a ballooning fiscal deficit in the wake of the wrangling over President Donald Trump's 'one big, beautiful' tax bill.

A poor reception to a 20-year T-bond auction on Wednesday aggravated the fears. 

The sell-off was more pronounced among small-caps and blue-chip stocks.

LPL Portfolio Strategist George Smith said that against the backdrop of trade policy uncertainty, it is prudent to keep tactical asset allocations closer to benchmarks than in times of greater economic clarity.

Smith did not rule out the possibility of defensive names outperforming if volatility returns.

The firm is neutral-weighted on U.S. equities, with large-caps still in favor. 

Morgan Stanley Chief Investment Officer Lisa Shalett said, "We are not out of the woods yet," despite the recent equity rally. The strategist added, "Investors wishing for a return of the 'Goldilocks' scenario of 2023 and 2024 may be disappointed."

Shalett recommended that investors focus on diversification in international equities, commodities, energy infrastructure, and hedge funds. She braced for average U.S. equity returns of 5%-10% amid increased structural volatility, higher real rates, and a weak U.S. dollar.

The Invesco QQQ Trust (QQQ) ETF dropped 1.39% on Wednesday, and the SPDR S&P 500 ETF (SPY) declined a steeper 1.69%.

The SPDR Dow Jones Industrial Average ETF Trust (DIA) and the iShares Russell 2000 ETF (IWM) slumped 1.93% and 2.81%, respectively.

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