July 22 (Reuters) - U.S. stock index futures rose on Monday as investors weighed the odds of a second term for Republican nominee Donald Trump in the November presidential election after President Joe Biden bowed out of the race and endorsed Kamala Harris's candidature.
Biden announced his withdrawal on Sunday and said he supported Vice President Harris for the Democratic ticket.
Megacap stocks rose in premarket trading as investors assessed the likelihood of another Trump White House. Meta Platforms (META.O), opens new tab, Alphabet (GOOGL.O), opens new tab and Apple (AAPL.O), opens new tab gained between 0.8% and 1.3%.
At 7:08 a.m. ET, Dow e-minis were up 70 points, or 0.17%, S&P 500 e-minis were up 29 points, or 0.52%, and Nasdaq 100 e-minis were up 165 points, or 0.84%.
Shares of Trump-linked stocks such as Trump Media & Technology Group (DJT.O), opens new tab and software firm Phunware (PHUN.O), opens new tab edged 0.6% and 0.2% higher, respectively.
Biden's exit could prompt investors to unwind trades betting that a Republican victory would increase U.S. fiscal and inflationary pressures, while some analysts said markets could benefit from an increased chance of a divided government under the next administration.
"What had originally been looking to be a subdued start to a week dominated by corporate earnings, US Q2 advance GDP and monthly PCE deflators has been turned on its head," said Marc Ostwald, global strategist at ADM Investor Services International.
Most U.S. Treasury yields including the benchmark 10-year bond yield , slipped after Biden's announcement, while Wall Street's "fear gauge" (.VIX), opens new tab traded at three-month highs.
The uncertainty over the Democratic ticket is the latest upheaval in the election cycle and comes as investors brace for a bevy of key quarterly earnings, including from two of the so-called Magnificent Seven companies - Google parent Alphabet (GOOGL.O), opens new tab and Tesla (TSLA.O), opens new tab. The question of whether the recent rally in top-tier high-momentum stocks is tenable is on everyone's minds.
Focus will also turn to crucial data throughout the week, including the Personal Consumption Expenditures Price Index - the Federal Reserve's preferred inflation gauge - durable goods and second-quarter GDP for insight into the U.S. central bank's monetary policy trajectory.
The combination of results and economic data will be a key test for Wall Street after a three-session sell-off that saw the Nasdaq and the S&P 500 logging their steepest weekly declines since mid-April on Friday.
It will also test whether a rotation out of expensive tech stocks to underperforming sectors will continue. Futures tracking the small-cap Russell 2000 rose 0.5% after the index (.RUT), opens new tab posted its second straight weekly gain.
Traders have broadly priced in a 25-basis-point rate cut by September and two cuts by the year-end, according to LSEG and CME's FedWatch data.
Among single movers, Nvidia (NVDA.O), opens new tab rose 1.8% after Reuters reported the AI chip leader was working on a version of its new flagship AI chips for the China market that would be compliant with current U.S. export controls.
Verizon Communications (VZ.N), opens new tab fell 2.5% after the company reported revenue below analysts' expectations, while Truist Financial (TFC.N), opens new tab lost 1.7% after reporting a 33% drop in second-quarter profit.
Cybersecurity firm CrowdStrike (CRWD.O), opens new tab lost 3.5% after a software update from the company sparked a global tech outage on Friday that grounded flights, forced broadcasters off air and left customers without access to essential services.
Reporting by Shubham Batra Ankika Biswas and Lisa Mattackal in Bengaluru; Editing by Sherry Jacob-Phillips and Pooja Desa
