US equity futures edged higher Tuesday, as Treasury bond yields stayed below the key 4% mark and investors waited to see what policy message Federal Reserve Chair Jerome Powell would deliver at his Congressional testimony later in the day.
(Bloomberg) — US equity futures edged higher Tuesday, as Treasury bond yields stayed below the key 4% mark and investors waited to see what policy message Federal Reserve Chair Jerome Powell would deliver at his Congressional testimony later in the day.
Investors are wary of making big bets before Powell speaks, and contracts on the S&P 500 rose about 0.3%, after the underlying gauge closed flat Monday. In premarket trading Meta Platforms Inc. was the most notable mover, rallying on news the Facebook-owner is preparing to cull thousands more employees, while futures on the tech-heavy Nasdaq held held around flat. Europe’s Stoxx 600 equities gauge also flatlined, as investors digested a surprise increase in German factory orders and a mixed bag of company earnings.
Many investors remain sidelined after being burnt repeatedly betting on an inflation peak, cooling US economy and Fed policy pivot. While the S&P 500 index is up 2% this month, recouping some of February’s losses, traders appear reluctant to push the gauge much higher, until they get more clarity on how high interest rates might go and whether the world’s largest economy will dodge recession.
“There have been some positive developments — growth has been better than expected and interest rates have adjusted higher without too much volatility on equities,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners. “We are at a point where the market is more or less correctly valued, so there is no need to be too negative on equities.”
He noted that 10-year US Treasury yields had failed to sustain their recent run above 4%, with yields currently around 3.92%, some 10 basis points below the multi-month peak hit last week. European bonds also rallied, as a European Central Bank survey showed a decline in inflation expectations.
The Fed chief’s testimony on Tuesday and Wednesday could now determine which way markets move. Powell will have the chance of telegraphing how much more policy tightening he thinks is needed. While a 25 basis-point rate hike is priced for the Fed’s March 21-22 meeting, there is an outside chance of a half-point increase.
US PREVIEW: Higher for Longer? What to Expect as Powell Speaks
The next key event after the testimony will be Friday’s monthly jobs report, which could show if the labor market is starting to cool. An outsize reading for January saw investors ramp up bets on further Fed policy tightening, with markets now factoring peak US rates around 5.4%.
That repricing has lifted the US dollar, which firmed against a basket of peers. The Australian dollar lost the most ground after the nation’s central bank said inflation may have peaked and further tightening will depend on incoming data.
The Aussie and other commodity currencies also face pressure from China’s decision to set a lower-than-expected economic growth target, and data showing a continued decline in exports and imports. A Bloomberg commodity index slipped for the second straight day.
Key events this week:
- US wholesale inventories, consumer credit, Tuesday
- Fed Powell’s semiannual Monetary Policy Report to the Senate Banking Committee, Tuesday
- Euro area GDP, Wednesday
- US MBA mortgage applications, ADP employment change, trade balance, JOLTS job openings, Wednesday
- Fed Chair Powell’s semiannual Monetary Policy Report to the House Financial Services Committee, Wednesday
- Canada rate decision, Wednesday
- EIA crude oil inventories, Wednesday
- China CPI, PPI, Thursday
- US Challenger job cuts, initial jobless claims, household change in net worth, Thursday
- Bank of Japan policy rate decision, Friday
- US nonfarm payrolls, unemployment rate, monthly budget statement, Friday
Some of the main moves in markets :
Stocks
- S&P 500 futures rose 0.1% as of 7:51 a.m. New York time
- Nasdaq 100 futures rose 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 was little changed
- The MSCI World index was little changed
- S&P 500 futures rose 0.1%
- Nasdaq 100 futures rose 0.2%
- The MSCI Asia Pacific Index fell 0.2%
- The MSCI Emerging Markets Index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.0664
- The British pound fell 0.3% to $1.1987
- The Japanese yen fell 0.2% to 136.18 per dollar
- The offshore yuan was little changed at 6.9453 per dollar
Cryptocurrencies
- Bitcoin was little changed at $22,387.24
- Ether was little changed at $1,566.14
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.94%
- Germany’s 10-year yield declined seven basis points to 2.68%
- Britain’s 10-year yield declined four basis points to 3.82%
Commodities
- West Texas Intermediate crude fell 0.6% to $80 a barrel
- Gold futures fell 0.5% to $1,844.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Denitsa Tsekova, Brett Miller, Cecile Gutscher and Michael Msika.
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