U.S. Stock Futures Rally Pauses as Traders Anticipate Key Events

by Warren Seah

The latest rally in U.S. stock futures stalled early Wednesday, with traders gearing up for a busy period that includes inflation updates and the beginning of the corporate earnings season.

How Stock-Index Futures are Trading

  • S&P 500 futures (ES00) rose 2 points, or 0%, to 4394.
  • Dow Jones Industrial Average futures (YM00) fell 2 points, or 0%, to 33934.
  • Nasdaq 100 futures (NQ00) gained 22 points, or 0.1%, to 15292.

Recent Performance

On Tuesday, the Dow Jones Industrial Average (DJIA) rose 135 points, or 0.4%, to 33739, while the S&P 500 (SPX) increased 23 points, or 0.52%, reaching 4358. The Nasdaq Composite (COMP) also gained 79 points, or 0.58%, closing at 13563.

Impact of Treasury Yields

The S&P 500 has experienced a 2.35% increase over the past three trading days, coinciding with a decline of about 20 basis points in the yield on 10-year Treasurys (BX:TMUBMUSD10Y). This drop comes after recent statements from Federal Reserve officials suggesting that the central bank might have completed its interest rate hikes for this cycle.

According to Richard Hunter, head of markets at Interactive Investor, “Markets continued to grind higher as the headwinds of the Middle Eastern conflict were neutralized by a further softening of rhetoric from the Federal Reserve.”

Outlook for the Market

Bond yields have fallen further on Wednesday. However, gains for stock-index futures have been limited as traders adopt a more cautious approach ahead of crucial economic data and corporate reports scheduled for the upcoming days.

The Surge of Optimism Fades as Investors Exercise Caution

The recent surge of optimism in the market, driven by hopes that the Federal Reserve will adopt a more lenient approach with its interest rate policies, seems to have reached a plateau. Susannah Streeter, the head of money and markets at Hargreaves Lansdown, notes that investors are becoming more cautious as they await the release of important economic data.

On Wednesday, before Thursday’s opening bell on Wall Street, investors will be keeping a close eye on two key reports: the producer prices data for September at 8:30 a.m. Eastern and the minutes from the Fed’s previous policy meeting at 2 p.m. Additionally, the U.S. consumer price index report for September will be published.

Streeter emphasizes that investors are highly sensitive to data, particularly when it comes to U.S. inflation. If this report shows any signs of deviating from its downward trajectory, it could disrupt expectations of a more dovish stance from the Fed and unsettle the market.

Wednesday will also see a number of speeches from Federal Reserve officials. Christopher Waller, a Fed Governor, will deliver comments in Park City, Utah at 10:15 a.m., followed by a speech on the economic outlook from Atlanta Fed President Raphael Bostic at 12:15 p.m. Later in the day at 4:30 p.m., Boston Fed President Susan Collins will give the Goldman Lecture on Economics at Wellesley College.

In addition to the economic data and Fed speeches, traders are eagerly awaiting the start of the third-quarter company earnings season. This season will kick into full swing with major banks like JPMorgan Chase, Citigroup, and Wells Fargo reporting their numbers on Friday.

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