Futures rise as Treasury yields take a breather; eyes on inflation data

[September 29, 2023]  By Ankika Biswas and Shashwat Chauhan

(Reuters) - U.S. stock index futures advanced on Friday as Treasury yields eased from multi-year highs and powered gains in growth stocks, while investors awaited a crucial inflation metric to assess the outlook for the Federal Reserve's monetary policy.

Apple, Microsoft, Tesla, Alphabet, Amazon.com and Nvidia advanced between 0.7% and 1.5% in premarket trading as two-year and 10-year Treasury yields declined.

"A move lower in bond yields has given equity markets a much-needed reprieve," said Tim Waterer, chief market analyst at KCM Trade.

With fears of high oil prices fueling inflation, investors are awaiting the U.S. central bank's preferred inflation metric, the personal consumption expenditures (PCE) price index, which is seen increasing 0.5% in August against a 0.2% gain in July.

The core rate, which excludes the volatile food and energy components, is expected to have increased 0.2% in August, similar to July's reading.

"If the core PCE price index print produces any sort of surprise to the upside, then this reprieve for risk assets may be short lived. Any signs of core pressures rising would increase the odds of a November hike," Waterer said.

Traders' bets on the benchmark rate remained unchanged in November and December at around 83% and 66%, respectively, according to CME's FedWatch tool.

Meanwhile, a 25-basis-point rate cut is being priced in as early as March, growing to around 36% in June and July.

U.S. consumer sentiment data for September is also due shortly after the opening bell.

At 7:03 a.m. ET, Dow e-minis were up 166 points, or 0.49%, S&P 500 e-minis were up 21.25 points, or 0.49%, and Nasdaq 100 e-minis were up 92.5 points, or 0.62%.

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

Overnight, Federal Reserve Bank of Richmond President Thomas Barkin backed the central bank's decision to hold rates steady earlier this month, but said it is unclear if more changes will be needed in the future.

Elsewhere, investors gauged the prospects of averting a government shutdown as the Democratic-led Senate forged ahead on Thursday with a bipartisan stopgap, while the House began voting on partisan Republican spending bills.

The S&P 500 and the Nasdaq are poised for their worst monthly showing of the year amid uncertainty around interest rates. All the three indexes, including the Dow, are set for their first quarterly decline in 2023.

Riding the current of higher crude prices, energy is set to emerge as the only major S&P 500 sector to notch monthly gains. Meanwhile, rate-sensitive information technology and real estate were on track to be the worst hit.

Wall Street's main stock indexes ended higher on Thursday, with investors assessing a fresh batch of economic data that depicted a generally stable economy with some pockets of weakness.

Among individual stocks, Nike jumped 8.5% after the sportswear maker posted a better-than-expected first-quarter profit.

(Reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Arun Koyyur and Maju Samuel)

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