U.S. Stock Market Preview | Three Major Index Futures Mixed, Palantir Rises After Earnings

Pre-Market Market Trends

1. As of August 5th (Tuesday), U.S. stock index futures are mixed before the market opens. As of the time of writing, Dow futures are down 0.01%, S&P 500 futures are up 0.19%, and Nasdaq futures are up 0.29%.

1. As of the time of writing, the German DAX index is up 0.77%, the UK FTSE 100 index is up 0.54%, the French CAC 40 index is up 0.21%, and the Euro Stoxx 50 index is up 0.34%.

1. As of the time of writing, WTI crude oil is down 0.89%, priced at $65.70 per barrel. Brent crude oil is down 0.76%, priced at $68.24 per barrel.

Market News

Dollar retreat + steep bull market in U.S. Treasuries, the "narrative logic" of the financial market is undergoing a transformation! "Rate cut trades" have become the main line. A recent research report from Mitsubishi UFJ Financial Group (MUFG) indicates that the significant underperformance of U.S. non-farm payrolls in July, along with a substantial downward revision of previous values, has led to a surge in market bets on the Federal Reserve cutting rates this year. Data cited by MUFG shows that the interest rate futures market has priced in approximately 64 basis points of easing for the remainder of 2025—indicating that rate cut expectations are converging towards a 75 basis point cut this year, with the probability of a rate cut in September rising to 90%. The MUFG strategy team stated that while attention must still be paid to subsequent employment and inflation data, the pricing of interest rates, the performance of the dollar index, and Wall Street's renewed embrace of the "steepening bull market in U.S. Treasuries" strategy indicate that "the Federal Reserve is about to reopen the rate cut cycle," gradually replacing the narratives of "Goldilocks" and "TACO" as the core logic driving stock, bond, and currency trading in the financial market. MUFG noted that last Friday's disappointing non-farm data, combined with multiple economic indicators showing signs of U.S. economic weakness but no significant inflationary pressure, greatly increased market bets on the Federal Reserve cutting rates. This non-farm employment report can be seen as the last straw that broke the back of the Fed's hawkish forces, with a rate cut in September evolving from an option to a near certainty.

Rate cut expectations upgraded again! San Francisco Fed President Daly shifts from wait-and-see to supporting rate cuts. San Francisco Fed President Mary Daly stated that given the increasing signs of weakness in the U.S. non-farm employment market and the absence of sustained inflation driven by tariff policies, the timing for the Federal Reserve to restart rate cuts is approaching, and it is more likely that the Fed will need to cut rates more than twice this year. Daly mentioned that there are still several key economic data releases to come before the September FOMC monetary policy meeting, including a labor market report and multiple inflation reports, and she will keep an open mind regarding the rate cut decision The pricing in the interest rate futures market shows that traders are betting heavily on the restart of the Federal Reserve's rate cut cycle, with the probability of a rate cut next month approaching 90%—up from less than 40% before the non-farm payrolls were released. There is also a growing bet on at least two rate cuts by the end of the year, including consecutive cuts of 25 basis points in September and October, along with a 25 basis point cut in December, totaling three cuts of 75 basis points by year-end.

High valuations meet cooling data, Wall Street giants issue warnings: U.S. stocks may face correction! As high stock valuations encounter deteriorating economic data, analysts from several top firms on Wall Street have issued warnings to clients, advising them to prepare for an impending market pullback. Morgan Stanley strategist Mike Wilson predicts a potential correction of up to 10% this quarter due to the impact of tariff policies on consumer and corporate balance sheets. Evercore's Julian Emanuel anticipates an even larger pullback, with declines possibly reaching 15%. The Deutsche Bank team led by Parag Thatte points out that given the stock market has surged for three consecutive months, a slight pullback has long been anticipated. These warnings stem from recent economic data that has raised concerns: last week's data showed rising inflation, slowing job growth, and weak consumer spending. More worryingly, the stock market is entering a traditional seasonal weakness period. According to compiled data, the S&P 500 index has performed the worst in August and September over the past thirty years, averaging a monthly decline of 0.7%, while other months have averaged a gain of 1.1%. Current market valuations are also at high levels. The relative strength index of the S&P 500 index broke 76 last week, reaching its highest level since July 2024, far exceeding the 70 threshold that market technical analysts consider a sign of overheating.

Jefferies: Fed rate cuts may reshape U.S. stock market dynamics, small-cap stocks expected to outperform large tech stocks. Investment bank Jefferies stated that as the Federal Reserve approaches rate cuts, the U.S. stock market may see a shift where small-cap stocks outperform large tech stocks. Jefferies' Senior Vice President of Equity Research Product Management Andrew Greenebaum noted that data since 1990 shows that during Fed rate cut periods, the equal-weighted S&P 500 index outperforms the market-cap-weighted S&P 500 index. Specifically, Jefferies' compiled data indicates that in the last four rate cut cycles, the equal-weighted S&P 500 index outperformed the S&P 500 index by an average of 0.6% over one year, about 4% over two years, and an average of 12.5% over four years. Andrew Greenebaum stated that the current potential rate cuts by the Fed come after "overcrowded" trading has pushed the weight of tech stocks in the S&P 500 index to new highs. He added, "We are not suggesting that tech stocks will plummet or experience severe sell-offs, but a dovish Fed often triggers changes in market dynamics, regardless of whether the overall index is high or low. Therefore, if last Friday's non-farm payroll data tells us anything, it is that now may be the time to start pulling funds out of large tech stocks." The strategist also pointed out that another reason small-cap stocks may outperform is that their trading is less crowded and their valuations are lower compared to large companies Goldman Sachs warns: Tariff impact + dual weakness in consumption and investment, U.S. Q4 GDP growth may plummet to 1.1%. Goldman Sachs warns that the U.S. economy may lose further momentum in the coming quarters, as previously released employment reports indicate that the pressure from tariffs is intensifying. In a report, Goldman Sachs predicts that the U.S. Gross Domestic Product (GDP) in the fourth quarter of 2025 is expected to grow only 1.1% year-on-year, far below the bank's estimated potential growth level of 2%. Goldman Sachs Chief Economist Jan Hatzius pointed out that domestic demand in the U.S. is weak, with consumer spending expected to grow only 0.8% in the second half of this year, while consumer spending is typically a major driver of the U.S. economy. Slowing job growth, rising prices due to new tariffs, and plans to cut government assistance programs are all expected to put pressure on household spending. Goldman Sachs' report suggests that Trump may need to prepare for more bad data this year. Corporate investment is expected to decline at an annualized rate of 0.6%, partly because companies began to cut spending after purchasing equipment in advance of tariff increases. Jan Hatzius added that investment will also be weighed down by "policy uncertainty and concerns about the economic outlook." Although consumer and corporate spending are expected to remain weak, Goldman Sachs' report notes that corporate inventory replenishment and a narrowing trade deficit may provide some support to overall U.S. GDP in the short term.

Individual Stock News

Palantir (PLTR.US) quarterly revenue surpasses $1 billion for the first time, raises full-year outlook for 2025. U.S. data software company Palantir delivered a "blowout" report in the second quarter of 2025, with revenue surpassing the $1 billion mark for the first time and strong profitability shocking the market. Thanks to robust growth in U.S. commercial and government orders, Palantir's revenue increased by 48% year-on-year, significantly exceeding the market expectation of 38%. Palantir's U.S. revenue soared 68% year-on-year in the second quarter, with government business growing by 53%, partly due to a large 10-year, $10 billion contract signed with the U.S. Department of Defense. As of the time of writing, Palantir's stock rose nearly 6% in pre-market trading on Tuesday.

Pfizer (PFE.US) Q2 revenue grows 10% year-on-year, exceeding expectations, raises full-year profit guidance. Thanks to a rebound in sales of COVID-19 combination products and initial effects of business restructuring, U.S. pharmaceutical giant Pfizer's second-quarter revenue and profit both exceeded market expectations. Management raised the full-year profit guidance and emphasized that it is in a critical phase of "rebuilding the growth engine." The financial report shows that Pfizer's Q2 revenue increased by 10% year-on-year to $14.65 billion, far exceeding the market expectation of $13.5 billion; net profit was $2.91 billion, with diluted earnings per share (EPS) of $0.51. Pfizer stated that the growth was mainly driven by a rebound in sales of its respiratory syncytial virus (RSV) vaccine Abrysvo and COVID-19 treatment Paxlovid. As of the time of writing, Pfizer's stock rose over 2% in pre-market trading on Tuesday.

BP (BP.US) Q2 profit exceeds expectations, new chairman to lead comprehensive business review. For the three months ending in June, its core replacement cost profit (used as a substitute for net profit) reached $2.35 billion, far exceeding the analyst consensus expectation of $1.81 billion In comparison, BP's net profit in the second quarter of last year was $2.76 billion, while in the first quarter of 2025 it was $1.38 billion. BP announced that the second-quarter dividend will be raised from $0.08 per share to $0.0832 per share, while maintaining the stock repurchase plan at $750 million. Additionally, BP announced that the new chairman will conduct a comprehensive assessment of the company's overall business portfolio and plans to further cut costs based on existing targets. This oil and gas giant is striving to reverse years of performance decline while facing increasing pressure for transformation, including pressure from activist investment firm Elliott Management.

Yum China (YUMC.US) reported a 14% year-on-year increase in operating profit, with revenue, operating profit, and operating profit margin reaching new highs for the second quarter. Yum China released its financial report for the second quarter of 2025. Operating profit was $304 million, a 14% year-on-year increase; operating profit margin increased by 100 basis points to 10.9%. Benefiting from the tenth consecutive quarter of same-store transaction volume growth, same-store sales achieved positive growth, and system sales increased by 4% year-on-year. Excluding the impact of market capitalization valuation and foreign currency conversion, diluted earnings per share increased by 15% year-on-year. The total number of company stores reached 16,978, with a net addition of 336 stores in the second quarter. It is expected that there will be a net addition of 1,600 to 1,800 stores for the entire year. The average annual shareholder return from 2025 to 2026 is expected to reach 9% of the company's market value. As of the time of publication, Yum China's stock rose over 3% in pre-market trading on Tuesday.

Spirits giant Diageo (DEO.US) exceeded expectations for fiscal year 2025, expecting organic sales growth of 1.7% for fiscal year 2026 and plans to further cut costs. Diageo's sales for fiscal year 2025 fell by 0.1% year-on-year to $20.245 billion, better than the consensus estimate of $20 billion; benefiting from price increases and improved sales volume, organic sales increased by 1.7% year-on-year, better than the consensus estimate of 1.4%. In terms of profit, operating profit fell by 27.8% year-on-year to $4.335 billion, and the operating profit margin declined by 819 basis points to 21.4%; net profit fell by 39.1% year-on-year to $2.538 billion. Diageo stated that it expects organic growth in sales for fiscal year 2026 to be similar to that of fiscal year 2025, with operating profit expected to achieve mid-single-digit organic growth. Like many peers, Diageo is facing economic uncertainty and consumer concerns about inflation caused by tariffs imposed by U.S. President Trump. Diageo currently estimates that annual tariff costs will reach $200 million, higher than the previous estimate of $150 million, of which about half can be mitigated through measures.

Important Economic Data and Event Forecast

Beijing time 22:00 U.S. July ISM Non-Manufacturing PMI

Earnings Forecast

Wednesday morning: AMD (AMD.US), Super Micro Computer (SMCI.US), Snap (SNAP.US), Lucid (LCID.US)

Wednesday pre-market: Novo Nordisk (NVO.US), Honda (HMC.US), Disney (DIS.US), Uber (UBER.US), Shopify (SHOP.US), McDonald's (MCD.US)