Stock index futures led by the Nasdaq slid on Tuesday, as rotation out of megacap technology stocks continued.
S&P 500 futures (SPX) -0.9%, Nasdaq 100 futures (US100:IND) -1.4% and Dow futures (INDU) -0.2%.
The 10-year Treasury yield (US10Y) rose 1 basis point to 4.18%. The 2-year yield (US2Y) rose 5 basis points to 4.48%.
The Dow on Tuesday closed within striking distance of 41,000 points, buoyed by another post-earnings surge in one of its components, while S&P and Nasdaq also closed in the green.
“For the most part, sentiment was supported by the retail sales data, which showed headline retail sales were unchanged in June,” Deutsche Bank’s Jim Reid said.
The small-cap Russell 2000 (RTY) also rose 3.5% on Tuesday. The Russell ETF (IWM) +0.4% is up slightly this morning.
“Rotation is the key word in financial markets at the moment, as the leadership of the U.S. market has very rapidly shifted away from the Mag-7 to the wider market,” Reid added.
Bloomberg reported this morning that the “momentum trade has fallen off a cliff” nothing that the “40-day correlation between Nasdaq Composite and Russell 2000 is usually over 60%. It just hit 0.”
Market participants are looking to invest in sectors other than tech. This trend from last week has seen traders rotating out of the tech behemoths and into other areas such as defensive and value stocks and small-cap names.
Traders will have some economic data to look forward to today. June Building Permits and Housing Starts will come before the bell. The former is expected to rise to an annual rate of 1.400M, while the latter is anticipated to come at 1.300M.
“And looking ahead, new home sales likely will remain subdued, even if mortgage rates decline, as the weakening in the labor market that we expect will greatly reduce the pool of potential buyers,” Pantheon Macroeconomics said.
The Atlanta Fed’s business inflation expectations and the Fed’s Beige Book are also expected later in the day.
