U.S. stock futures are pointing to a cautious start on Tuesday, with all three major indices trading slightly lower. This comes after the markets surged over 4% last week, driven by the Republican sweep and the Federal Reserve's 25-basis-point rate cut. Investors may be looking to take some profits, even as experts believe the current equity bull run still has room to run.

Navigating the Shifting Tides of the Market

Futures Point to a Cautious Open

Futures for the Nasdaq 100, S&P 500, and Dow Jones are all trading in negative territory, suggesting a cautious sentiment on Wall Street. The Nasdaq 100 futures are down 0.35%, the S&P 500 futures are down 0.29%, and the Dow Jones futures are down 0.19%. The Russell 2000 futures are also down 0.80%, indicating a potential pullback in small-cap stocks.

Recapping the Previous Session

The Dow Jones Industrial Average made history on Monday, crossing the 44,000 mark for the first time and closing the day up over 300 points at 44,293.13. The S&P 500 and Nasdaq Composite also closed higher, gaining 0.10% and 0.06%, respectively. The Russell 2000 index led the way, surging 1.47%.Crude oil prices remained below the $70 mark as the risk of Hurricane Rafael receded, providing some relief. Treasury yields continued to rise, signaling concerns about the incoming administration's ability to maintain fiscal discipline.Most sectors on the S&P 500 closed on a positive note, with consumer discretionary, financials, and industrials stocks recording the biggest gains. However, information technology and real estate stocks bucked the overall market trend, closing the session lower.

Analysts Weigh In on the Outlook

Ryan Detrick, chief market strategist at Carson Group, agreed with FundStrat's Tom Lee on the potential for small-cap stocks to continue their outperformance. Lee believes "there's still a lot of upside" in small-cap stocks, and they could outperform by more than 100% over the next couple of years.WisdomTree and Wharton School economist Jeremy Siegel also remain bullish on the equity markets, stating that the "bull market sentiment remains intact." Siegel believes that expectations of "lighter regulations" from the incoming administration would benefit equities, and that the environment remains favorable for continued economic stability.However, Siegel cautioned that the gains investors have seen this year are unlikely to be repeated in 2025, suggesting that the market may be due for a correction or a period of more moderate growth.

Upcoming Economic Data and Earnings

The economic calendar for Tuesday is relatively light, with Fed Governor Christopher Waller, Richmond Fed President Tom Barkin, and Philadelphia President Patrick Harker all scheduled to speak.Investors will be closely watching earnings reports from Tyson Foods, The Home Depot, and Occidental Petroleum, among others, for insights into the state of the economy and the performance of key sectors.

Stocks in Focus

Tesla shares continued to rally on Monday, gaining nearly 9%, but were down nearly 2.9% in premarket trading on Tuesday. Trump Media & Technology Group Corp. shares were also down over 5.6% in premarket trading.On the other hand, Live Nation Entertainment shares were up over 6.6% in premarket trading after the Ticketmaster parent beat market expectations and expressed optimism about 2025. Cryptocurrency-related stocks, such as MicroStrategy, Coinbase, and Robinhood, also surged between 7% and 26% as Bitcoin continued to set new highs.As the market navigates these shifting tides, investors will be closely watching for any signs of a potential pullback or a continuation of the current bull run. The coming days and weeks will be crucial in determining the direction of the markets and the overall economic outlook.