Higher-for-Longer Rates Cast Shadow on U.S. Stock Futures’ Performance

On Friday, there were difficulties with U.S. stock futures due to a disappointing bond auction and recent indications that interest rates may remain elevated for an extended period, leading to a pause in the positive performance of key stock indexes.

How stock-index futures are trading

  • The S&P 500 futures, with a small drop of 1.5 points, fell to a value of 4,360.75.
  • Futures for the Dow Jones Industrial Average, symbolized by YM00, increased by 29 points to reach a value of 33,974, showing a rise of 0.28%.
  • The Nasdaq-100 futures, symbol NQ00, were down by 38.75 points, standing at a value of 15,217.75.

The Dow industrials, S&P 500, and Nasdaq Composite all experienced declines on Thursday. The Dow dropped 220.33 points or 0.7% to close at 33,891.94, while the S&P 500 fell by 35.43 points or 0.8% to close at 4,347.35. The Nasdaq Composite experienced the largest drop, with a decrease of 128.97 points or 0.9% to close at 13,521.45.

Market drivers

On Thursday, the S&P 500 and Nasdaq Composite’s longest winning streaks since November 2021 came to an end following a 30-year Treasury bond sale worth $24 billion that was not well received.

On Friday, bond yields experienced a slight decrease. The yield on the 30-year Treasury note, known as BX:TMUBMUSD30Y, declined by 2 basis points to 4.739%, compared to Thursday’s rate of 4.777%. Thursday’s surge in yield was almost the largest one-day increase since June 2022.

The impact of a reported ransomware attack on the U.S. unit of the Industrial & Commercial Bank of China, which caused disruption in the U.S. Treasury market, was uncertain concerning its effect on the Treasury auction.

Investors were reconsidering the recent surge in the stock market that was driven by the expectation that the Federal Reserve would stop raising interest rates. This change in sentiment was prompted by comments made by Federal Reserve Chairman Jerome Powell. He expressed caution about being misled by temporary fluctuations in inflation and said that reaching the targeted 2% goal was not guaranteed.

Pierre Veyret, a technical analyst at ActivTrades, stated that the abrupt shift towards a more aggressive stance contradicts the previously suggested cautious approach discussed in the last FOMC gathering. As a result, investors are uncertain and unclear about the future direction of monetary policies.

In the current situation, investors are expected to wait for concrete guidance and measures from central banks instead of basing their decisions on rumors and word choices. Consequently, stock markets may stabilize at a lower level of uncertainty as investors hold off on making major changes to their risk investments until next week’s data on consumer prices in the US, European Union, and UK is released.

The consumer price data for November in the United States will be made public on the upcoming Tuesday.

On Friday, investors will be paying close attention to the comments made by various members of the Federal Reserve. Lorie Logan, the President of the Dallas Fed, is scheduled to speak at 7:30 a.m., followed by Raphael Bostic, the President of the Atlanta Fed, at 9 a.m., and Mary Daly, the President of the San Francisco Fed, at 1 p.m. The University of Michigan will also release their preliminary consumer sentiment survey for November at 10 a.m., all in Eastern time.

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