Where we are: Dow futures are currently trading at 49465, up 115 points or 0.23% on the day, hovering near the top of today’s 49320-49545 range. This compares to yesterday’s Dow Jones cash close around 49168. While the Dow is holding up relatively well, the broader market is under pressure, with S&P 500 and Nasdaq futures both significantly lower.
What’s driving it: The Dow is benefiting from relative strength in traditional and defensive sectors as the tech sector faces a major reckoning. The negative sentiment is fueled by reports of OpenAI missing its targets and sparking renewed concerns about the sustainability of AI-driven capital expenditure. This is playing out in a rotation away from tech and towards more established, value-oriented names, directly boosting the Dow. Rising US yields aren’t helping the broader picture, with the 2Y at 3.848% and the 10Y at 4.364%, putting further pressure on growth stocks.
- UPS beating earnings expectations is providing a modest tailwind, confirming the underlying health of traditional commerce.
- The modestly short net positioning in Dow futures (-1,731 contracts) leaves room for upside surprise.
- WTI crude oil at $91.06 is lifting energy stocks within the Dow, further contributing to its outperformance.
NY session focus: Watch the 10:00 ET release of the CB Consumer Confidence data; a miss on the 89.0 forecast could exacerbate the risk-off tone. Key level to watch is 49,500 on the upside – a break above that would signal continuation of the rotation trade. Conversely, a break below 49,300 would suggest the tech weakness is dragging down even the Dow. The current trade is being long Dow versus short Nasdaq. The risk trade is that Meta, Microsoft, and Alphabet earnings, due after tomorrow’s close, quell AI fears and initiate a renewed tech rally. The pain trade here is a violent reversal that sees tech outperform and the Dow sharply underperform, negating this morning’s relative strength.