DJIA futures rose to an overnight high near 49,800, then reversed during Tuesday’s session. In the cash session, the DJIA fell about 0.2%, the S&P 500 dropped 0.3%, and the Nasdaq Composite slipped 0.1% as oil prices moved higher.
March US Retail Sales came in at 1.7% month-on-month versus 1.4% forecast. The Control Group was 0.7% versus 0.2% expected, and ex-autos was 1.9% versus 1.4%.
After the 12:30 GMT data release, Treasury yields rose and DJIA futures turned lower. At 14:00 GMT, Fed Chair-designate Kevin Warsh’s testimony received a 7.0 hawkish rating in the FXStreet speech tracker, with attention then shifting to Fed Governor Christopher Waller’s 18:30 GMT speech.
WTI rose 4% to above $93 a barrel and Brent gained 2% to above $98. A ceasefire tied to Iran was due to expire on Wednesday, with reference to possible military action if no agreement is reached.
UnitedHealth rose over 6% after Q1 results and an increased full-year outlook, while Amazon gained over 1% after outlining up to $25 billion for Anthropic. DJIA futures ranged from about 49,000 to just under 49,800, traded near 49,400, and the Stochastic RSI was near 16.50; it referenced 49,800 as a recovery level and 49,000 as support, with upcoming data including jobless claims, flash PMI, and UoM expectations at 4.8% (1-year) and 3.4% (5-year).
The market is pulling back because strong consumer spending is making us think the Federal Reserve won’t be able to cut interest rates soon. This new data suggests that being long broad market index futures is risky right now. We should probably reduce our bullish exposure until the outlook on rates becomes clearer.
The hawkish message from the incoming Fed chair adds to our worries. After we saw the market rally through late 2025 on the promise of several rate cuts, this new tone is a significant change. With recent government data showing core inflation still stubbornly above 3.5%, the path for lower rates that we expected is now very much in doubt.
The spike in oil prices to over $93 a barrel due to Middle East tensions is another major headwind. This directly fuels inflation and hurts corporate profits, creating more uncertainty across the board. We should expect the VIX, which sat near a calm 15 last month, to rise, making strategies that benefit from higher volatility, like buying straddles on the S&P 500, more attractive.
While the overall market looks weak, we are seeing strength in specific stocks like UnitedHealth and Amazon. This points to opportunities in sector-specific trades, perhaps favoring healthcare and AI-focused tech over rate-sensitive industries like banking. Using call options on these outperforming stocks could be a way to capture upside while limiting risk in a shaky market.
For short-term index traders, the key levels on DJIA futures are 49,000 and 49,800. A decisive break below the 49,000 support level would be a strong signal to initiate bearish positions like buying put options. Until then, the market will likely be choppy as we wait for the crucial inflation expectations data at the end of the week.
