Stock Market

U.S. stock futures pause after Powell-inspired bounce – News Opener

U.S. stock futures on Thursday retraced a tiny part of the previous session’s big bounce as traders awaited important economic data.

How are stock-index futures trading
  • S&P 500 futures
    ES00,
    -0.10%

    dipped 4 points, or 0.1%, to 4077

  • Dow Jones Industrial Average futures
    YM00,
    -0.18%

    fell 56 points, or 0.2%, to 34543

  • Nasdaq 100 futures
    NQ00,
    -0.27%

    eased 30 points, or 0.2%, to 12013

On Wednesday, the Dow Jones Industrial Average
DJIA,
+2.18%

rose 737 points, or 2.18%, to 34590, the S&P 500
SPX,
+3.09%

increased 122 points, or 3.09%, to 4080, and the Nasdaq Composite
COMP,
+4.41%

gained 484 points, or 4.41%, to 11468. The Dow Jones Industrial Average rose 20.4% during October and November, the biggest two-month percentage gain since July 1938, according to Dow Jones Market Data.

What’s driving markets

U.S. equity futures were a bit softer on Thursday, as investors paused to reflect after a less-hawkish Jerome Powell delivered a strong end to November, and the market awaited important economic data over the next few days.

The S&P 500 surged 3.1% on Wednesday following the Fed chairman’s confirmation that a lower pace of rate hikes to combat inflation was more likely in coming months. It took the U.S. stock benchmark’s gains since its 2022 low in mid-October to 14.1%, after recent signs of easing price pressures had encouraged risk appetite once more.

“The general upbeat feeling since last month’s soft CPI print has carried into December after stocks surged thanks to a speech from Fed Chair Powell…With markets increasingly predisposed to a terminal rate below 5% and inflation getting back close to target in 2024, the stock market’s rally could extend as pivot hopes should increase with interest rate risk now disproportionately skewed to the downside,” said Stephen Innes, managing partner at SPI Asset Management.

“With so much money on the sidelines, fund managers may need to move into catch-up mode, so I suspect the market makers will position to get ahead of this flow in the new year so that the stock market dips will be shallow,” Innes added.

However, investors will be aware that the Fed’s policy trajectory remains dependent on data showing inflation continuing to slow as the economy cools. To that end traders will be keenly eyeing a batch of important data over the next two sessions.

Two reports in particular may hold great sway: the October PCE price index, among the Fed’s favored inflation gauges, is released on Thursday at 8:30 a.m.; and the nonfarm payrolls survey will be published on Friday at the same time.

Two-year Treasury yields
TMUBMUSD02Y,
4.330%
,
which are particularly sensitive to monetary policy trends, were a touch firmer but held near the 10-week lows to which they fell following Powell’s comments. The dip in yields has taken the shine off the dollar index
DXY,
-0.32%
,
off 0.3% to 105.64, its lowest since August, and boosted gold
GC00,
+1.75%
,
up 1.7% to $1, 790 an ounce, close to a four-month high.

Meanwhile, Mark Newton, head of technical strategy at Fundstrat, warned that the stock market may experience a pause for a while following recent gains.

“Wednesday’s strong ‘whoosh’ higher for equities and Treasuries has lifted prices along with yields to levels that are near technical targets for a possible trend reversal next week,” Newton wrote in a note to clients.

“My time target of 12/5-9 for a pause/stalling out looks to be growing increasingly near, and [the S&P 500] is growing quite close to the 4120 target that I’ve discussed in recent weeks,” he added.

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