S&P 500 poised for fresh record high as futures advance

U.S. stock futures advanced on Monday, building off a record finish ahead of the ramping up of fourth-quarter earnings season.

What’s happening

Dow Jones Industrial Average futures YM00, +0.16% rose 42 points, or 0.1%, 38087
S&P 500 futures ES00, +0.33% gained 14 points, or 0.3%, to 4883
Nasdaq-100 futures NQ00, +0.62% increased 97 points, or 0.6%, to 17535

On Friday, the Dow Jones Industrial Average DJIA rose 395 points, or 1.05%, to 37864, the S&P 500 SPX increased 59 points, or 1.23%, to 4840, and the Nasdaq Composite COMP gained 255 points, or 1.7%, to 15311.

The S&P 500 closed Friday at a record high, and the Dow notched its second record close of the year.

What’s happening

While indexes have been notching record highs, not every stock has been participating.

Mike Wilson, the strategist at Morgan Stanley who has been pessimistic about markets, noted the unwind of the year-end rally in lower-quality stocks, the equal-weighted S&P 500 and small caps RUT.

“The relative performance moves this year are a reversion back to the classic late cycle environment in which we find ourselves which in many ways is synonymous with a soft landing,” said Wilson in a note to clients.

Expectations of Fed rate cuts has lowered bond yields and raised equity valuations, which he says is typically a late-cycle phenomenon.

Matthew Tuttle, the chief executive and chief investment officer at Tuttle Capital Management, said the Magnificent Seven tech giants have now technically moved into overbought conditions.

“My sense is that we don’t go anywhere fast until we work out the disagreement between the market and the Fed on rate cuts, but don’t underestimate the power of the bulls when they get going,” said Tuttle.

Earnings season ramps up this week with results due from companies including IBM IBM, +2.78%, Netflix NFLX, -0.49% and Tesla TSLA, +0.15%.

Also of note will be the release of GDP and the PCE measure of inflation, as well as rate decisions from the European Central Bank and the Bank of Japan.

Chinese plays continued to struggle, as the Hang Seng HK:HSI dropped a further 2% to start the week, though European equity markets XX:SXXP advanced.

Archer Daniels Midland ADM, -0.80% was in the spotlight on Monday as the agribusiness giant said it put its chief financial officer on administrative leave as it investigates accounting at its nutrition segment. Shares of the group tumbled in premarket.