Futures jump as investors await Fed rate verdict; Middle East tensions eyed

[October 30, 2023]  (Reuters) - U.S. stock index futures climbed on Monday as tensions in the Middle East failed to dampen investor sentiment ahead of a busy week full of earnings reports and an interest rate decision from the Federal Reserve.

Israeli troops stepped up ground operations in Gaza early on Monday, with Palestinians in the enclave reporting fierce air and artillery strikes as the conflict entered its fourth week.

However, the clashes had little impact on U.S. stock markets, with megacap growth names such as Nvidia, Amazon.com and Tesla up between 0.9% and 1.6% in premarket trading.

"The ground offensive in Gaza will still be causing some concern, but it has been largely expected and that's why I don't think you've seen any kind of particularly adverse reaction on the markets today," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"In the United States, the emphasis has returned to the resilience within the U.S. economy and that being a good thing rather than as an indicator that there could be a rate hike."

Geopolitical concerns as well as a surge in Treasury yields have weighed on U.S. equities this month, dragging the benchmark S&P 500 down over 10% from its intraday high in July.

On Monday, the yield on the ten-year note was at 4.86%, after having breached the 5% level earlier this month.

Adding to bond market worries, the U.S. Treasury is likely to boost the size of auctions for bills, notes, and bonds in the fourth quarter when it announces its financing plans this week to fund a worsening budget deficit. A subsequent rise in yields may further pressure stocks.

A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 27, 2023. REUTERS/Brendan McDermid

With inflation gradually easing in the United States, the Federal Reserve is widely expected to keep interest rates unchanged at the end of its policy meeting on Nov. 1, according to the CME Group's Fedwatch tool.

However, certain parts of the economy have proved to be resilient, spurring concerns that the central bank could signal willingness to hold rates at their current level for longer than previously anticipated.

A fresh batch of data on the U.S. economy this week, ending with the October's non-farm payrolls report on Friday, will be on the watchlist for further cues on the Fed's monetary policy path.

Investors also await quarterly results from companies including McDonald's, Apple, Pfizer and Eli Lilly, with the third-quarter earnings season having reached the halfway point.

At 5:22 a.m. ET, Dow e-minis were up 178 points, or 0.55%, S&P 500 e-minis were up 29 points, or 0.7%, and Nasdaq 100 e-minis were up 123.5 points, or 0.87%.

Among individual stocks, Coherus Biosciences jumped 15.2% in premarket trade as the U.S. health regulator approved the company's treatment for nasopharyngeal cancer.

(Reporting by Amruta Khandekar; Editing by Maju Samuel)

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