Barron's | Stock Futures Are Rising Amid Israel, Iran Tension and Concern Fed Will Keep Rates High

U.S. stock futures were pointing up early Tuesday after falling the previous two sessions on worries that the Federal Reserve will have to maintain high interest rates to keep inflation under control.

Dow Jones Industrial Average futures added 217 points, or 0.6%. Futures for the S&P 500 rose 0.2%, and those for the Nasdaq 100 were up 0.1%. All three indexes closed lower for a second straight session Monday.

A few big earnings reports came in better than expected before the market opened, including from Bank of America and UnitedHealth. On Monday, a beat on retail sales data showed that consumers are still spending.

On the other hand, those signs of strength may also mean that the Fed keeps interest rates higher than hoped, particularly if renewed tension in the Middle East pushes up energy prices. Worries about the Fed were reflected in rising bond yields Monday–the 10-year Treasury yield inched up to 4.641% early Tuesday.

The bigger issue is whether stocks are starting a broader correction, which could make them fall further. On the other hand, it could also be a bump in the road or of the bull market that has helped the S&P gain more than 20% over the past year.

“A stock market correction is unfolding right now triggered by Middle East tensions, rising bond yields and worries about delayed Fed rate cuts,” said James Demmert, chief investment officer at Main Street Research. “The magnitude of this stock market correction will depend in large part on what's going on in the Middle East.”

Demmert added that a correction is an opportunity to buy stocks.

“We are buyers of this stock market correction because while the headlines are scary right now, we believe we have entered a new bull market led by the power of artificial intelligence,” he noted. “This new bull market can last for another 7-9 years.”

Read the full article here.

Disclosures: Main Street Research LLC (“MSR”) is an SEC registered investment adviser; however, this does not imply any level of skill or training, and no inference of such should be made. The opinions expressed herein are as of the date of publication and are provided for informational purposes only. Content will not be updated after publication and should not be considered current after the publication date. We provide historical content for transparency purposes only. All opinions are subject to change without notice and, due to changes in the market or economic conditions, may not necessarily come to pass. Mention of a security should not be considered a recommendation or solicitation to purchase or sell the security, and any securities mentioned may be held by MSR for client portfolios. The information posted represents an opinion as of the date published and should not be considered an investment recommendation. MSR does not become a fiduciary to any reader or other person or entity by the person’s use of or access to the material. The reader assumes the responsibility of evaluating the merits and risks associated with the use of any information or other content and for any decisions based on such content. Investment disclosure —neither the information nor any opinion expressed herein constitutes a solicitation by main street of the purchase or sale of any securities or other financial instruments nor a recommendation to hold, sell, buy, or own a particular security or sector in your portfolio and do not represent all securities purchased, sold or recommended for client accounts. The listener should not assume that an investment in these securities has been or will be profitable. Individual recommendations are tailored to individual portfolios. Main street client portfolios are managed separately and vary in regard to risk and return dependent upon individual client circumstances. A full list of all securities in the MSR client portfolio is available upon request.