Futures rise on dovish Fed tone, Middle East tensions weigh

[October 10, 2023]  (Reuters) - U.S. stock index futures ticked higher on Tuesday following the dovish comments from Federal Reserve policymakers, though caution prevailed amid escalating tensions in the Middle East.

Top ranking Fed officials indicated that rising yields on long-term U.S. Treasury bonds could steer the central bank from further increases in its short-term policy rate.

Yield on the U.S. 10-year note came off its 16-year peak on Tuesday as trading resumed in the U.S. bond market after the Columbus Day, also known as Indigenous Peoples' Day holiday.

"The shift in gears from bear steepening to bull flattening translates only into a fractional easing in financial conditions after the abrupt tightening since mid-September," strategists at Societe Generale said in a note.

"For some, the change begs the question if bond yields, on both sides of the Atlantic, have now peaked."

Traders put the chance of interest rates remaining unchanged in November and December at 87% and around 71%, respectively, according to CME's FedWatch tool.

Megacap stocks, including Apple, Microsoft, Alphabet, Nvidia and Meta Platforms, added between 0.1% and 0.4% in premarket trading.
 

Investors would keenly watch remarks from Fed Governor Christopher Waller and Fed Bank of Minneapolis President Neel Kashkari during the day.

Meanwhile, Israel said it had re-established control over the Gaza border and was planting mines where Hamas militants had toppled the barrier during their bloody weekend assault, after another night of relentless Israeli air raids on the enclave.

Israel's latest round of air strikes came after Hamas threatened to execute an Israeli captive every time it bombed a Palestinian home without warning.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 28, 2023. REUTERS/Brendan McDermid/File Photo

All three major stock indexes closed higher in the previous session, shrugging off initial uncertainty with energy leading gains among the S&P 500 sectors. Supply worries ignited by Middle East conflict had sent crude prices soaring on Monday.

Later in the week, investors would look out for inflation readings including September producer price and consumer price indexes as well as the Fed's September meeting minutes.

Toward the end of the week, big U.S. banks - including JPMorgan Chase, Wells Fargo and Citigroup -would kick off the earnings season.

At 5:07 a.m. ET, Dow e-minis were up 59 points, or 0.17%, S&P 500 e-minis were up 7.25 points, or 0.17%, and Nasdaq 100 e-minis were up 30.25 points, or 0.2%.

Among stocks, PepsiCo edged 0.8% higher ahead of the beverage maker's third-quarter results.

Unity jumped 6.4% after the video-game software maker said its CEO John Riccitiello would retire.

Rivian Automotive added 3.2% on a report that UBS upgraded the EV maker's stock to "buy" from "neutral".

U.S.-listed shares of Chinese firms, including Alibaba Group Holding, JD.com, PDD Holdings and Baidu, rose between 1.1% and 2.4% on a report Beijing is considering new stimulus to meet annual growth target.

(Reporting by Shashwat Chauhan in Bengaluru; Editing by Arun Koyyur)

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