Nasdaq Futures Climb As AI Optimism Allays Rate Worries — Meta, Microsoft, Alphabet Report Earnings After Fed Decision

• The major indices climbed to fresh highs yet again on Tuesday, as heavyweight tech stocks lent support.
• A strategist said AI innovation is viewed as transformative, and the market's forward multiple reflects this optimism, topping 23 times.
• The 10-year U.S. Treasury note yield remained below the 4% level ahead of Wednesday’s Fed decision.

Major index futures point to a mixed start early Wednesday, after stocks steamrolled to a fourth straight session of gains. The market could trade sideways ahead of the Federal Reserve’s rate decision at 2 p.m. ET, and the language in the central bank's post-meeting policy statement and Chair Jerome Powell’s press conference could set the tone for the rest of the session.

Traders may remain guarded, as three of the big techs with exposure to artificial intelligence, namely Microsoft Corp. (MSFT), Meta Platforms, Inc. (META) and Alphabet, Inc. (GOOG) (GOOGL), are set to report their financial results after the market closes. 

How Futures Are Trading

As of 3 a.m. ET on Wednesday, the Nasdaq 100 and the S&P 500 futures advanced 0.44% and 0.24%, respectively, while the Dow and Russell 2000 futures slipped 0.08% each.

On Stocktwits, retail sentiment toward the SPDR S&P 500 ETF (SPY), an exchange-traded fund that tracks the S&P 500 Index, and that toward the Invesco QQQ Trust (QQQ) ETF, which tracks the Nasdaq 100 Index,  improved to ‘neutral’ heading into Wednesday’s session, from ‘bearish’ a day ago. The message volumes on the SPY stream remained ‘normal,’ while that on the QQQ stream stayed at ‘high’ levels.

How Markets Traded Tuesday

The major indices climbed to fresh highs yet again on Tuesday, as heavyweight tech stocks lent support, after AI bellwether Nvidia (NVDA) sparked a rally across AI names and those with adjacency to the technology. On the other hand, small-caps came under some selling pressure. 

Nvidia jumped nearly 5% after CEO Jensen Huang’s GTC Washington keynote, while its mega-cap tech peers Microsoft and Apple hit the $4 trillion market capitalization milestone, joining Nvidia in the elite club. 

The SPY, QQQ ETFs and SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.27%, 0.77%  and 0.38%, respectively, while the iShares Russell 2000 ETF (IWM) declined 0.54%.

Eric Teal, Chief Investment Officer for Comerica Wealth Management, said, “Investors are experiencing one of the most commanding momentum-driven markets since the Internet.” “The AI innovation is viewed as transformative, and the market's forward multiple is reflective of this optimism, topping 23 times.”  

Technology has accounted for 60% of market returns and most of the earnings growth, Teal said, adding that a Fed easing cycle is now serving as an additional catalyst to spur valuations higher. The broadening out of the market and outperformance of small-cap companies in the third quarter and October suggest the benefits are expanding, the strategist said.

Key Catalysts To Watch Out For

The Federal Open Market Committee (FOMC), the central bank's rate-setting committee, is widely expected to announce a quarter-point cut at 2 p.m. ET. In a note released Monday, Morgan Stanley Chief U.S. Economist Michael Gapen said limited data availability should not stop the Fed from reducing its policy rate again in October and signaling another cut is likely in December. “But it could limit how far rate guidance extends past year-end,” he said.

Powell will host a press conference at 2:30 p.m. ET to explain the logic behind the rate decision and the outlook for rates. The National Association of Realtors will release its pending home sales report for September at 10 a.m. ET.

Aside from the three megacap tech names, other prominent companies reporting their quarterly results are Caterpillar, American Electric, CVS Health, Etsy, GE Healthcare, GlaxoSmithKline, Kraft Heinz, Verizon, Carvana, Chipotle Mexican Grill, eBay, KLA Corp, MGM Resorts, ServiceNow, Starbucks, Transocean and Wolfspeed.

How Other Markets Fared

Crude oil futures are modestly higher early Wednesday as the commodity seeks to snap a three-session losing streak that took it below the $60 mark. Gold futures eased further, and the 10-year U.S. Treasury note yield remained below the 4% level. The U.S. dollar ticked up slightly ahead of the Fed meeting.

Major Asian markets traded on a mixed note, with tech optimism lending support to some markets with heavy tech exposure. At the same time, the rest pulled back amid nervousness ahead of the Fed decision. Japan’s Nikkei 225 average climbed more than 2% to a fresh record following President Donald Trump’s visit to the country, which culminated in several trade agreements.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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