Lamentable news from the tech sector has cast a heavy shadow over the market today, with Nasdaq futures taking a nosedive in early trading on Wednesday, while the Dow futures are barely keeping afloat. Earnings from industry giants like Advanced Micro Devices, Inc. AMD, Microsoft Corp. MSFT, and Alphabet, Inc. GOOGL GOOG have triggered negative reactions. This slump is aggravated by the latter’s weakness in ad revenue, adding to the somber ambiance engulfing the market.

Traders are treading cautiously, awaiting the Federal Reserve’s impending rate decision, casting an anxious gaze at the policy statement for hints regarding potential timing and magnitude of future rate cuts, as suggested by Comerica Chief Investment Officer John Lynch. The writing seems to be on the wall for a pause decision at the January meeting.

Past Performance Influence:

Stocks closed mixed on Tuesday as traders digested pre-market earnings and geared up for pivotal tech earnings reports later in the day. They also responded to encouraging job market, housing, and consumer confidence metrics.

In light of recent positive Main Street data, traders have recalibrated their rate cut expectations, leading to a surge in financial stocks that is keeping the Dow Industrials afloat. The S&P 500 is edging away from its recent high, and the Nasdaq Composite is likewise mired in a slump.

On Tuesday, communication services, IT, and real estate stocks pulled back, while energy and financial stocks made modest gains across the S&P sector indices. This displays the tug-of-war between sectors vying for dominance in a market brimming with uncertainty.

Insight into Tuesday’s US Index Performance

Analyst Insights:

Comerica’s Lynch pointed out, “When the S&P 500 goes more than a year without hitting new highs, the Index generally performs well over the next 12 months. In eight of the nine previous instances, the S&P has marched higher, delivering an average return of 12.1%. Additionally, new highs tend to come more quickly with the Index setting record closes an average of 37 times in the following year, accounting for roughly 15% of all trading days.” This historical trend buttresses the notion of “time in” the market surpassing attempts to “time” the market.

Market Sentiment Today

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY is down 0.43% to $488.78, and the Invesco QQQ ETF QQQ is plummeting 1.01% to $420.99, according to data from Benzinga Pro.

Upcoming Economic Data:

ADP is scheduled to release its private payroll report for January at 8:15 a.m. ET, with expectations for 145,000 new jobs added, slightly down from December’s 164,000.

At 8:30 a.m. ET, the Labor Department will unveil its employment cost index for the fourth quarter, with a consensus estimate of a 1% increase quarter-over-quarter, compared to the 1.1% gain in the third quarter.

At 9:45 a.m. ET, the Chicago Institute of Supply Management will release its regional business activity survey, expecting to see improvement from December to January, though December’s data showed ongoing contraction.

The Energy Information Administration is set to release its weekly petroleum status report at 10:30 a.m. ET, painting a vital picture of the energy market and global consumption.

The Fed is anticipated to release its post-meeting policy statement at 2 p.m., followed by Chair Jerome Powell’s press conference at 2:30 p.m. ET, offering insights about the state of the economy and the reasoning behind monetary policy decisions.

Stocks In Focus:

• AMD experienced around a 6% slump in premarket trading following the company’s quarterly results.
• Microsoft saw a roughly 1% decline, while Alphabet suffered a 6% dip. Other notable fluctuations include Electronic Arts Inc. EA (down about 2%), Mondelez International, Inc. MDLZ (down over 4%), and Skyworks Solutions, Inc. SWKS (up nearly 3.5%). The market seems wildcarded and await further drama.