Stock futures are little changed after market returns to record highs: Live updates

U.S. equities, including the S&P 500 and Nasdaq, closed at fresh record highs Tuesday, propelled by tamer-than-expected inflation data that bolstered expectations for a September Federal Reserve rate cut, with the Russell 2000 also seeing a significant surge. However, futures are largely flat as markets await Thursday's Producer Price Index report and the upcoming Jackson Hole meeting. After-hours trading saw Cava shares plunge over 22% following disappointing revenue guidance, while AI infrastructure provider CoreWeave declined despite a revenue beat. Some analysts caution that recent market strength, particularly in small-caps, may be seasonal and overlooks underlying concerns about the labor market and broader growth trajectory.

Analysis

U.S. major indexes, including the S&P 500 and Nasdaq Composite, closed at fresh record highs, gaining 1.1% and 1.4% respectively, propelled by inflation data that was perceived as tamer than expected. This data significantly increased market expectations for a Federal Reserve rate cut in September, with the CME FedWatch Tool indicating a nearly 94% probability. The risk-on sentiment was further evidenced by a nearly 3% surge in the Russell 2000 index, as small-cap stocks are viewed as key beneficiaries of lower borrowing costs. However, a sense of caution pervades the market, with stock futures trading nearly flat as investors await Thursday's producer price index report and commentary from the Fed's Jackson Hole meeting. This cautious tone is amplified by significant after-hours volatility in specific stocks; Cava shares plunged over 22% after lowering its full-year sales forecast, while AI infrastructure firm CoreWeave dropped about 5% despite reporting that its revenue more than tripled, suggesting investor expectations in the sector are exceptionally high. Adding to the circumspection, some analysts, such as Warren Pies of 3Fourteen Research, posit that the recent rally may be a seasonal phenomenon, warning that the market could be overlooking underlying weakness in the labor market and the broader growth narrative.

Key Decisions for Investors

• Given the market's record highs juxtaposed with flat futures, investors should monitor upcoming catalysts like the PPI report and the Jackson Hole meeting, as they could trigger significant volatility.
• The severe after-hours punishment of Cava for its guidance cut and CoreWeave for its 'beat-but-not-enough' results highlights the critical need to scrutinize individual company execution, as market tolerance for disappointment appears low even amid broad bullishness.
• While the surge in small-caps is pronounced, investors should weigh the possibility that this is a seasonal move rather than a fundamental shift, especially with analysts flagging potential risks in the underlying growth story.
• With a September Fed rate cut almost fully priced in, interest-rate-sensitive positions are vulnerable to any hawkish surprise from upcoming economic data or central bank commentary, which could trigger a rapid reversal of recent gains.