U.S. stock futures climbed early Tuesday, pointing to continued momentum after Monday’s rally. While concerns persist over the state of the U.S. economy following disappointing labor data, optimism around corporate earnings and growing speculation of a potential Federal Reserve rate cut next month have kept investor sentiment afloat. Meanwhile, former President Donald Trump has sharpened his rhetoric on India’s Russian oil imports, threatening steep new tariffs. Palantir (NASDAQ:PLTR), on the other hand, jumped in after-hours trading after a strong quarter driven by surging government demand and a hike in its annual revenue forecast.
Futures Edge Higher
U.S. equity futures showed modest gains in the early hours of Tuesday trading, following a positive start to the week. Investors are weighing mixed signals from the economy against encouraging earnings reports.
As of 03:37 ET, Dow futures were up by 50 points (0.1%), S&P 500 futures rose 12 points (0.2%), and Nasdaq 100 futures added 63 points (0.3%).
Monday’s gains helped markets recover from a sharp drop at the end of last week, which had been triggered by soft job data and renewed trade concerns. Trump’s decision to fire the head of the Bureau of Labor Statistics over downward revisions to May and June employment figures added to the political drama and economic uncertainty.
Analysts at Vital Knowledge noted that signs of a weakening labor market could, paradoxically, increase the likelihood of a Fed rate cut in September. CME’s FedWatch Tool now puts the odds of a cut next month at around 90%, up from 63% a week earlier.
Earnings optimism is also playing a role in lifting sentiment. “[T]he fact we’re coming through a […] earnings season where management teams didn’t sound dramatically alarmed about economic conditions is giving investors some comfort,” analysts at Vital Knowledge wrote.
Trump Escalates Tariff Threats Toward India
On Monday, Trump took aim at India over its continued purchases of Russian oil, threatening to “substantially” increase tariffs on Indian goods.
In a sharp escalation, he suggested imposing a 25% reciprocal tariff on Indian exports and even hinted at levies as high as 100% on countries that remain major buyers of Russian oil, naming both India and China. Trump’s stance on Moscow has hardened, particularly following stalled negotiations over a ceasefire in Ukraine.
He also criticized India’s participation in the BRICS alliance, accusing the group of attempting to counterbalance U.S. influence globally.
Despite the pressure, Reuters reported that India has no plans to alter its oil purchases from Russia, citing long-standing diplomatic and economic ties. In response to the trade uncertainty, Indian government bonds dipped slightly in early trading, and some analysts now anticipate a rate cut from the Reserve Bank of India at its upcoming meeting.
Palantir Delivers Blowout Quarter
Shares of Palantir soared in after-hours trading after the company announced its strongest quarterly revenue since its 2020 public debut. Robust demand for its AI-enabled products, particularly from U.S. government agencies, fueled the results.
Recent initiatives by the White House to promote AI adoption, alongside increased Pentagon spending on software from alternative vendors, have played to Palantir’s strengths in defense and analytics.
Second-quarter revenue jumped 48% year-over-year to approximately $1 billion, with over 40% of that total attributed to U.S. government contracts. The Denver-based firm, co-founded by Peter Thiel, also surpassed expectations for adjusted earnings.
Palantir raised its full-year revenue guidance to a range of $4.14 billion to $4.15 billion, up from its previous forecast of $3.89 billion to $3.90 billion.
On Tuesday, investors will also be watching results from Caterpillar (NYSE:CAT) and Pfizer (NYSE:PFE) before the bell, followed by chipmaker Advanced Micro Devices (NASDAQ:AMD) after the close.
Services Sector Data in Focus
This week’s U.S. economic calendar is relatively light, though Tuesday brings a key update from the services sector. The Institute for Supply Management is set to release its non-manufacturing PMI, which is expected to inch higher to 51.5 in July from 50.8 in June.
A reading above 50 signals expansion. The ISM notes that readings above 49 typically align with broader economic growth. Given that services represent more than two-thirds of U.S. economic activity, investors are paying close attention to the data.
Also due Tuesday is a trade update on U.S. imports and exports for June. Preliminary GDP figures suggested imports fell last quarter, following a temporary spike earlier in the year linked to tariff-driven stockpiling.
China’s Services Sector Outperforms
In Asia, China’s services sector surprised to the upside in July. The S&P Global China General Services PMI climbed to 52.6, up from 50.6 in June and ahead of the 50.4 consensus estimate.
S&P Global attributed the improvement to strong domestic and international demand. Consumer-focused stimulus measures have supported domestic spending, while services exports remain relatively untouched by ongoing U.S. tariffs, which largely affect physical goods.
The upbeat services reading stood in contrast to recent weakness in China’s manufacturing data. Despite broader economic concerns, the services sector has been a consistent area of growth so far this year.
Note: Caixin is no longer sponsoring the S&P Global China PMI as of July.
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