S&P 500 Futures Slip As Momentum Stalls After 6-Day Rally: Morgan Stanley Picks Best And Worst Sectors In Shaky Market

U.S. stock futures were modestly lower in overnight trading following a late-session recovery, which helped the major indices finish marginally higher on Monday.

As of 11:02 pm ET on Monday, the S&P 500 and Nasdaq 100 futures were down 0.23% and 0.34%, respectively, while the Dow futures slipped 0.08%. The Russell 2000 futures declined 0.34%.

The West Texas Intermediate (WTI) grade crude oil futures held above $62 a barrel in the Asian session on Tuesday. Oil has gained some ground in recent sessions on hopes of an end to the Russia-Ukraine war and a U.S.-Iran nuclear pact.

Gold futures languished around the $3,222-an-ounce mark, while the U.S. 10-year Treasury note yield slipped 2.6 points to 4.449% after rising to 4.5% intraday on Monday in reaction to the Moody’s downgrade of the U.S. credit rating.

Asian stocks were all trading higher early on Tuesday.

Among the key Main Street catalysts is a slew of speeches by Federal Reserve officials, including Richmond Fed President Thomas Barkin (9 a.m. ET), Boston Fed President Susan Collins (9:30 a.m. ET), St. Louis Fed President Alberto Musalem (1 p.m. ET), and Fed Governor Adriana Kugler ( 5 p.m. ET).

Home Depot, Inc. (HD), homebuilders Hovnanian (HOV) and Toll Brothers (TOL),  Vipshop (VIPS), Viasat (VIA), and Palo Alto Networks (PANW) are all due to release their quarterly results on Tuesday.

U.S. stocks traded sharply below the unchanged line in Monday morning’s session, dragged by the Moody’s downgrade and the surge in bond yields. The indices cut their losses in the afternoon amid a rise in defensive stocks and ended modestly higher for the session after some choppy trading in a narrow range.

In the process, the S&P 500 Index ended higher for a sixth straight session.

One of Morgan Stanley’s conditions for a durable rally—a U.S.-China trade deal—has materialized. The firm now believes the S&P 500’s upside progress through the 6,100 mark depends on a continued reacceleration in earnings revisions, as interest rate relief remains elusive.

Morgan Stanley’s Equity Strategist Michael Wilson said the industry drivers of the rise in revisions are cyclicals. “Of the groups showing relative strength, we'd focus on Industrials, in particular, on the long side,” he said.

“The laggards are more concentrated in Consumer Discretionary and Consumer Staples, which is supportive of our less favorable stance on these sectors.”

The Invesco QQQ Trust (QQQ) ETF, an exchange-traded fund (ETF) that tracks the Nasdaq 100 Index, edged up 0.10% on Monday, and the SPDR S&P 500 ETF (SPY) added 0.11%

The SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 0.35% while the iShares Russell 2000 ETF (IWM) fell 0.42%.

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