LDN - Business

Futures mixed as markets await more policy cues

[November 09, 2023] By Amruta Khandekar and Shristi Achar A

(Reuters) - U.S. stock index futures struggled for direction on Thursday as uncertainty about when the Federal Reserve will start easing financial conditions kept investors on edge as they awaited further policy cues from central bank officials.

Signs of a weakening labor market and a tempering of the Fed's hawkish stance at its last meeting have pulled U.S. Treasury yields down from multi-year highs, helping equities stage a stellar comeback from their October lows.

However, the rally has run out of steam as several Fed policymakers this week pushed back against market expectations that the central bank will begin cutting interest rates soon.

The benchmark S&P 500 eked out marginal gains on Wednesday, but managed to extend its longest winning streak in two years.

A majority of traders are betting that the Fed will keep interest rates unchanged this year, with odds of a cut of at least 25 basis points in May standing at nearly 47%, according to the CME Group's FedWatch tool.

"The market got carried away regarding how soon it thought we would be seeing interest rate cuts being delivered. It took the message that further rate hikes were unlikely as ... cuts were coming soon," said Stuart Cole, head macro economist at Equiti Capital.

"But that was never the case and comments from various CB (central bank) officials this week have very much opened eyes to this."

The yield on the benchmark ten-year Treasury note was largely steady at 4.5255% while that on the two-year note, which best reflects short-term rate expectations, inched up to 4.9487%.

Chicago Fed President Austan Goolsbee said the U.S. central bank will need to pay close attention to the effects of higher longer-term bond yields to make sure they don't slow the economy more than expected over the coming year, according to a Wall Street Journal report.

Among the Fed speakers on tap, Chair Jerome Powell is scheduled to speak at an International Monetary Fund (IMF) conference at 2 p.m. ET (1900 GMT). He had refused to comment on monetary policy at another conference on Wednesday.

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A trader passes by a screen that displays the trading info for Intercontinental Exchange Inc. (ICE) on the floor of the New York Stock Exchange (NYSE) March 1, 2016. REUTERS/Brendan McDermid

Richmond Fed President Thomas Barkin is also expected to discuss the outlook for the U.S. economy later in the day.

Investors will also assess a Labor Department report, due at 8:30 a.m. ET, which is expected to show jobless claims edged up to 218,000 for the week ended Nov. 4 from 217,000 in the prior week.

At 7:03 a.m. ET, Dow e-minis were up 38 points, or 0.11%, S&P 500 e-minis were up 3.25 points, or 0.07%, and Nasdaq 100 e-minis were down 15.25 points, or 0.1%.

On the earnings front, shares of Walt Disney rose 4.1% in premarket trade after the entertainment company exceeded Wall Street estimates for quarterly profit on higher attendance at its Shanghai and Hong Kong theme parks.

Arm Holdings dropped 5.1% as the semiconductor firm gave a fiscal third-quarter sales forecast that fell short of analyst estimates.

Theatre chain AMC Entertainment rose 2.7% on beating third-quarter revenue estimates.

MGM Resorts International added 3.5% on beating third-quarter estimates for profit and revenue as the casino operator benefited from easing pandemic restrictions.

(Reporting by Amruta Khandekar and Shristi Achar A; Editing by Maju Samuel)

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