S&P 500 Futures Rally as Fed Signals Higher-for-Longer Rates

On Friday, U.S. stock index futures exhibited predominantly positive movements, marking a shift from their previous trend following the Federal Reserve’s recent announcement of an increased interest-rate forecast for the upcoming year on Wednesday.

What’s happening

  • The futures for the Dow Jones Industrial Average, represented by YM00, dropped by 7 points or 0.14%, reaching a value of 34330.
  • The S&P 500 futures, also known as ES00, increased by 5 points or 0.1% to reach 4377.
  • The Nasdaq 100 futures, NQ00, grew by 0.64% as they climbed 46 points, equivalent to a 0.3% increase, reaching a total of 14908.

On Thursday, the Dow Jones Industrial Average experienced a decrease of 370 points, equivalent to a 1.08% decline, reaching a value of 34070. Similarly, the S&P 500 declined by 72 points, or 1.64%, settling at 4330. The Nasdaq Composite also saw a drop of 245 points, accounting for a 1.82% decrease, with a final value of 13224.

Over the past three days, there has been a decrease of 2.8% in the S&P 500.

What’s driving markets

On Friday, stocks appeared to stabilize after experiencing two days of decline caused by the Federal Reserve’s announcement. The Fed decided to maintain its policy interest rates but raised its projected rates for 2024 by 0.5%.

On Thursday, there was also data indicating a surprising decrease in people filing for unemployment benefits, indicating a robust job market. This caused the 2-year Treasury yield to reach its highest level since 2006, and the 10-year yield to reach its highest level since 2007.

Saxo Bank strategists said that the consequences of the recent announcement from the U.S. Federal Reserve, which suggested that interest rates would remain high for an extended period of time, are still being felt. Wall Street experienced its largest decline in six months, as the yield on the 10-year benchmark Treasury bonds reached 4.5% for the first time since 2007. Additionally, the likelihood of future interest rate reductions has been reduced to only 75 basis points.

According to reports, the S&P 500 and the Nasdaq 100 both finished at levels of technical support, which could lead to a slight recovery in spite of the current bearish trend.

The Bank of Japan’s decision to maintain its loose monetary policy stance unchanged marked the end of a hectic week for central bank decisions. This move resulted in the dollar strengthening against the yen, recording a 0.41% increase in the USDJPY exchange rate.

On Friday, the economic calendar in the United States will feature the initial reports of the purchasing managers index for the manufacturing and service sectors from S&P Global. Additionally, a speech will be given by Fed Gov. Lisa Cook at a conference focused on artificial intelligence.

Companies in focus

  • Activision Blizzard Inc., a global gaming company, experienced a nearly 2% increase in premarket trading following an announcement by the U.K. Competition and Markets Authority. The authority stated that Microsoft Corp.’s modified proposals regarding its acquisition of Activision have made it possible for the $75 billion deal to receive clearance. As part of these revised arrangements, Activision would transfer its cloud-gaming rights to French videogame publisher Ubisoft Entertainment SA, which resulted in a 3.5% rise in Ubisoft’s shares in Paris.
  • Chinese stocks received a boost as Alibaba Group Holding Limited rose by 3.8%, NIO Inc. climbed by 3.6%, and JD.com Inc. shares were up by 3.2%. On Friday, the Hang Seng Index in Hong Kong closed with a 2.2% increase after two days of selling, which had caused the index to reach its lowest point in a month. Furthermore, there was news on Friday that China is contemplating easing restrictions on the foreign ownership of publicly traded companies.

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