Futures dip as rate cut optimism wanes; more Fed speakers on tap
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[November 07, 2023] By
Amruta Khandekar and Shristi Achar A
(Reuters) - Futures tracking Wall Street's main indexes fell on Tuesday
as optimism over potential rate cuts from the Federal Reserve next year
waned, with investors on tenterhooks ahead of more commentary from
central bank officials.
After a stellar rally last week driven by tumbling Treasury yields,
equities have lost momentum in recent days as investors await commentary
by Fed policymakers for any signs of a pushback against expectations
that U.S. interest rates have peaked.
Federal Reserve Bank of Minneapolis President Neel Kashkari doused hopes
of early rate cuts late on Monday, saying the central bank likely has
more work ahead of it to control inflation.
Adding to the pressure on stocks, U.S. Treasury yields also rebounded
from multi-week lows in the previous session, ahead of large bond
auctions this week that could determine whether there is enough demand
for U.S. government debt.
The benchmark ten-year Treasury yield was last at 4.6204%, slightly
lower than Monday's level.
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Market participants will parse commentary from Fed Board Governor
Christopher Waller and New York Fed President John Williams later on
Tuesday for more clues on the central bank's interest rate path. Fed
Chair Jerome Powell's remarks will grab the spotlight on Wednesday.
Uncertainty about the timing of potential rate cuts and some dismal
corporate forecasts for the fourth quarter have cast a doubt on whether
there could be a year-end rally for stocks.
"The chatter of potentially higher-for-longer rates, growing signs of
slowing global economy and the rising recession odds don’t offer a
bright outlook for equities into the year end," said Ipek Ozkardeskaya,
senior analyst at Swissquote Bank.
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Traders work on the floor at the New York Stock Exchange (NYSE) in
New York City, U.S., October 27, 2023. REUTERS/Brendan McDermid/File
photo
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"Seasonally speaking, November and December are known to be good
months for the S&P500 stocks. But this year, the picture is
overshadowed by a lot of weak guidance and revenue warnings."
The corporate earnings season has entered its last leg, with a
majority of the companies in the S&P 500 having already reported
results for the third quarter.
EBay and Bumble are among those scheduled to post their results late
on Tuesday.
At 6:57 a.m. ET, Dow e-minis were down 106 points, or 0.31%, S&P 500
e-minis were down 14.5 points, or 0.33%, and Nasdaq 100 e-minis were
down 43.25 points, or 0.28%.
Oil firms including Exxon Mobil, Chevron and Occidental Petroleum
fell between 0.8% and 1% in premarket trading, tracking a 2% decline
in crude prices on mixed economic data from China. [O/R]
Shares of Intel edged up 0.6% after a report said the chipmaker was
the leading candidate to likely get billions in government funding
for secure defense-chip facilities.
(Reporting by Amruta Khandekar; Editing by Maju Samuel)
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