U.S. stock futures ticked up slightly before Tuesday’s bell as oil pulled back on signs of progress toward reopening the Strait of Hormuz. Equities are hovering near record highs, but the next leg higher likely hinges on this week’s inflation data.
Both the CPI and PPI prints will help traders gauge the odds of a Fed rate hike in September, especially with the Fed pulling back on forward guidance and keeping the focus squarely on inflation.
Supporting the market so far, strong quarterly earnings across several sectors and early signs that AI spending is paying off have helped push stocks to new highs and calmed some investor nerves.
Hedge funds flipped back to buying last week, redeploying capital after July’s record unwind. Large cap positioning jumped from near neutral to overweight in a single week.
About 80% of the buying came from long adds, the rest from short covering. Positioning jumped to the 87th percentile, led by tech, which is back to the 95th percentile, just shy of the October and June highs. The chart below shows that same positioning measure since September 2024. It’s stayed in a fairly contained range for most of that stretch, with only one real extreme, a sharp drop during the April 2025 selloff.
Positioning is running roughly in line with mid-teens earnings growth expectations, well below the 33% growth companies just delivered in Q2. That gap leaves funds exposed to getting caught underweight again if earnings surprise to the upside a second time.
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