U.S. stock index futures were mixed early Thursday, but indicating the S&P 500 will open only a fraction short of a fresh record close.
How are stock-index futures trading
-
S&P 500 futures
ES00,
+0.01%
rose 2 points, or less than 0.1% to 4835 -
Dow Jones Industrial Average futures
YM00,
-0.15%
fell 50 points, or 0.1% to 37956 -
Nasdaq 100 futures
NQ00,
+0.23%
gained 41 points, or 0.2% to 17154
On Wednesday, the Dow Jones Industrial Average
DJIA
rose 111 points, or 0.3%, to 37657, the S&P 500
SPX
increased 7 points, or 0.14%, to 4782, and the Nasdaq Composite
COMP
gained 25 points, or 0.16%, to 15099.
What’s driving markets
A small uptick in bond yields early Thursday nudged stock index futures down from their early session highs.
Still, hopes for a raft of interest rate cuts by the Federal Reserve next year continued to underpin stock markets as Wall Street prepared for the penultimate trading session of 2023.
The S&P 500 has gained 24.5% so far this year and is looking to open Thursday only about 9 points below its record close of 4,796.56, set on Jan. 3, 2022.
Equity investors have welcomed a recent sharp decline in benchmark borrowing costs as the 10-year Treasury yield
BX:TMUBMUSD10Y
has fallen from more than 5% to about 3.8% in the space of a couple of months on hopes easing inflation means the Fed can begin cutting rates in coming months.
“Investors are still in good spirits, toasting hopes of interest rate cuts in the U.S. coming sooner rather than later next year,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “Indices have been powered higher, partly by optimism about a soft landing for the U.S.”
And sentiment also has been lifted this week by strong auctions of U.S. government 2-year
BX:TMUBMUSD02Y
and 5-year bonds
BX:TMUBMUSD05Y
on Tuesday and Wednesday respectively, evidence that the market is relaxed with Treasury yields at the lower levels.
Traders doubtless will be keen to see if the good run continues at 1 p.m. Eastern when the Treasury looks to sell $40 billion of 7-year notes
BX:TMUBMUSD07Y.
However, some analysts were wary that investors may be a bit optimistic about the speed of Fed easing.
“If global equity markets have one Achilles Heel going into January 2024, it is the expectation that the Fed will be methodically and consistently cutting interest rates throughout the year,” said Nicholas Colas, co-founder of DataTrek Research.
But that is not necessarily a bearish argument for stocks, he added, especially if economic growth remains strong enough that corporate earnings grow by seven to 10% in 2024.
“Against that backdrop, the Fed will be able go slow on rate cuts. While that might leave rates higher than they would otherwise have been, earnings growth should buoy investor confidence and allow valuations to expand modestly next year,” Colas said.
U.S. economic updates set for release on Thursday include the weekly initial jobless benefit claims report, alongside November readings of the trade balance in goods, retail and wholesale inventories, all published at 8:30 a.m. Eastern.
Pending home sales for November will be released at 10 a.m.
