Dow Jones futures eased 0.03% to about 49,550 during European hours on Tuesday. S&P 500 and Nasdaq 100 futures fell 0.16% and 0.48%, near 6,850 and 24,700.
US index futures moved lower as risk appetite weakened, extending last week’s sell-off linked to concerns about AI-driven disruption. Software shares led declines, while semiconductor shares held up better on expectations of continued demand for high-performance computing and advanced chips.
Fed Minutes In Focus
Markets stayed cautious ahead of the Federal Open Market Committee meeting minutes due on Wednesday. Softer January US Consumer Price Index data and steadier labour market figures supported expectations of rate cuts later this year.
The CME Group’s FedWatch tool shows a 52.7% chance of a 25-basis-point cut in June and 42.7% in July. Traders are also watching corporate results due later this week from Walmart, Warner Bros. Discovery, and Booking Holdings.
Economic data due on Friday include Q4 annualised Gross Domestic Product and the core Personal Consumption Expenditures price index. These releases may guide expectations for future policy moves.
With futures pulling back, we are seeing a cautious tone to start the week. This suggests looking at protective put options on broad indices like the SPX or QQQ to hedge against any further downside. A simple strategy is to buy near-term puts to capitalize on this short-term fear before key economic data is released.
Options Strategies To Consider
The split between software and semiconductor stocks is creating a clear opportunity for a pairs trade. We saw this trend develop throughout 2025, where semiconductor ETFs consistently outperformed software-focused funds by a significant margin. A strategy could involve buying call options on a semiconductor index while simultaneously buying puts on a software index to capitalize on this continuing divergence.
Uncertainty around the Fed’s next move is pushing up short-term volatility, which we see reflected in the VIX index recently ticking above 15. With the market split on a June versus July rate cut, option premiums on index ETFs are elevated. This presents an opportunity to sell options, like an iron condor on the SPY, to collect premium if we expect the market to remain range-bound after the FOMC minutes are released.
The upcoming earnings from names like Walmart create specific event-driven trading possibilities. Historically, a stock like Walmart can see a post-earnings move of 4-5%, so buying a straddle could be a play on that expected volatility, regardless of direction. Furthermore, Friday’s core PCE data will be critical, as a surprise reading could significantly shift the rate cut probabilities we’re currently seeing.
