U.S. stock futures on Monday flirted with their highs of the year as benchmark borrowing costs traded near their lowest since the summer.
What’s happening
-
S&P 500 futures
ES00,
+0.32%
rose 10 points, or 0.2%, to 4778 -
Dow Jones Industrial Average futures
YM00,
+0.18%
gained 56 points, or 0.1%, to 37,717 -
Nasdaq-100 futures
NQ00,
+0.21%
added 17 points, or 0.1%, to 16,837.25.
The Dow
DJIA
last week surged 2.9%, ending Friday at a record, while the S&P 500
SPX
saw a 2.5% weekly rise and the Nasdaq Composite
COMP
surged 2.9%.
What’s driving markets
Stock-index futures are marginally firmer as the last full trading week of the year gets under way with the S&P 500 sitting at its best level in nearly two years, and less than 2% from its record high.
The equity benchmark has delivered a seven-week winning streak– the best such run in six years — gaining 14.6% in that period amid hopes the Federal Reserve will start cutting interest rates next year.
The 10-year Treasury yield
BX:TMUBMUSD10Y,
which in October popped above 5%, was trading around 3.9% at the start of the week, its latest leg lower coming after the Fed last week appeared to signal a dovish monetary policy pivot.
However, trading in stock futures and bonds was less ebullient early Monday, after Fed officials — including New York Federal Reserve Bank President John Williams and Chicago Fed President Austan Goolsbee — in recent days looked to rein in expectations that the central bank was likely to start cutting rates soon.
“The surge in risk appetite, fueled by the U.S. Federal Reserve’s recent stance, has paused as [S&P 500] bulls are likely catching their breath at the open,” said Stephen Innes, managing partner at SPI Asset Management.
“Despite some pushback from Fed officials, interest rate futures markets are still currently pricing 150 basis points of rate cuts from the Federal Reserve next year. So, the recent decline in bond yields and the dollar is expected to underpin risk assets throughout the week,” Innes added.
Resolute bull Tom Lee, head of research at Fundstrat, said stocks will also be supported by the buying of fund managers who had been worried about the macroeconomic environment and therefore until recently had been overly defensive.
“As we think about the final two weeks of 2023, this tells me that there will be a certain amount of performance chasing into year end,” said Lee. “And couple that with the fact that retail investors withdrew $240 billion from ETF and mutual funds, in a year when S&P 500 [was up greater than] 25%, and one can see why equities have an underlying bid into year end.”
U.S. economic updates set for release on Monday include the home builder confidence index for December, due at 10 a.m. Eastern.
Companies in focus
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U.S.-listed shares of Nio Inc.
NIO,
+1.53%
rose more than 8% in premarket trade on Monday after the Chinese electric vehicle maker said it’s received a $2.2 billion investment from an Abu Dhabi investor.
