Dow futures rose about 0.4 percent on Tuesday, while Nasdaq 100 futures fell about 0.4 percent, as investors moved money out of chip and tech hardware stocks and into financials and industrials before the inflation report. The rotation is the market way of saying it is nervous about technology and comfortable with everything else.
Why it matters
The chip selling has a specific cause. Nvidia fell more than 4 percent on Monday as its board opened a probe into chief executive Jensen Huang, and the stock has now fallen more than 22 percent over the past month. Traders are dumping the hardware names before the CPI report, and the money is going to the banks and the factories instead. The stock had plunged as much as 8 percent earlier in the session on Monday, and it fell to 172.37 dollars shortly after Wall Street opened, hitting a multi month low.
The inflation report is the reason for the caution. Economists expect prices to rise 0.3 percent from a month earlier, with core inflation forecast to ease to 0.2 percent, and the report comes out at 8:30 a.m. Eastern. If the number is hot, the chip stocks that led the rally will lead the fall, and the rotation into industrials will look like good timing.
What happens next
The split is visible across the market. The S and P 500 was close to flat in early trading, with futures near 7,573.75, while the Dow stood near 52,682 and the Nasdaq 100 near 27,908.50. Oil fell as well, with Brent and West Texas Intermediate each dropping more than 2 percent, as traders bet on diplomacy over war.
What happens next will be decided at 8:30, when the report lands, and after the bell, when CoreWeave, D-Wave Quantum and Rigetti Computing report earnings. A cool inflation number would let the rotation reverse and the chip buyers return. A hot one would reward the cautious, and the market will know within minutes which it is. For now, the market is hedged, and Tuesday will show whether the hedge was needed, and whether the chip buyers come back or stay away.
