US pre-open: Stocks to edge higher with tech sector in focus on Facebook woes
Stocks on Wall Street looked set for a positive open on Tuesday following heavy losses in the previous session, with the tech sector likely to be in focus again as the latest revelations about Facebook spark concerns of tighter regulatory controls.
At 1210 GMT, Dow Jones Industrial Average and Nasdaq futures were up 0.1%, while S&P 500 futures were 0.2% firmer.
The Federal Reserve's two-day policy meeting gets underway later in the day as investors price in a 25 basis points hike and await the latest dot plot projections to see how many more rate increases are on the cards for this year.
David Morrison, senior market analyst at GKFX, said: "US stock index futures were rallying ahead of the open and pointing to a firmer start for equities. Nevertheless, yesterday’s sharp sell-off may have done some technical damage to US markets, indicating a significant shift in sentiment amongst investors. The Dow’s losses meant the index has now lost ground over the course of the year while the S&P 500 has slumped below both its 50 and 100-day simple moving averages. Yet the tech-heavy NASDAQ 100 still looks remarkably resilient, despite it suffering the heaviest losses in percentage terms yesterday after Facebook shares slumped.
"But investors look likely to remain cautious ahead of the release of the Fed’s rate statement tomorrow and the FOMC’s quarterly Summary of Economic Projections. There’s concern that members of the FOMC may raise their forecasts for future rate hikes. That could see US Treasury yields spike higher and this would weigh on equities going forward."
On the corporate front, Facebook took a beating on Monday, losing nearly $40bn of its market cap after it emerged that data company Cambridge Analytica - which was used by Donald Trump's presidential campaign and in the EU referendum - improperly harvested information from 50m of the social network's users. The stock looked set to come under pressure again on Tuesday, weighing on the broader tech sector.
Chris Beauchamp, chief market analyst at IG, said: "The big worry will be whether the Facebook news will widen into a larger investigation and as result the dip buyers will stay their hand for the time being."
Elsewhere, Oracle Corp tumbled in pre-market trade as its quarterly earnings report released late on Monday left investors disappointed, while MGM Holdings could be in focus after it said that chairman and chief executive Gary Barber has been fired.