(Bloomberg) — US stocks are set to hold at record highs Thursday as traders weighed a softer US inflation print against the Fed’s more hawkish tone on interest rates.
Most Read from Bloomberg
Futures contracts for the S&P 500 edged higher while those for the tech-heavy Nasdaq 100 rose 0.6%. Treasury yields and the dollar were little changed.
Risk-on assets had rallied on Wednesday after a report showed the US core consumer price index fell to the lowest in more than three years, spurring bets on faster policy easing. Later, the Federal Reserve penciled in just one quarter point interest-rate cut this year, down from three seen in March.
Swap traders are currently pricing in a 25-basis-point rate cut by November, with a 75% likelihood of a similar reduction by year-end. That compares with a 50% chance of a second cut two days ago. US initial jobless claims and producer price data may offer more signals later on Thursday.
Among single stocks, Tesla Inc. surged in premarket trading after Chief Executive Officer Elon Musk said shareholder resolutions to re-ratify his pay package and moving the company’ s legal home to Texas were passing by “wide margins.” Broadcom Inc. gained 14% on robust demand for its chips.
In Europe, stocks relinquished gains in response to the Fed’s rate projections. The Stoxx 600 dropped 0.7% after advancing the most in a month following the softer US inflation print.
“The Fed dot plot was marginally on the hawkish side, causing some pullback in the markets,” said Mohit Kumar, chief economist for Europe at Jefferies International. Any selloff in stocks would be a buying opportunity, he said.
Adding to the caution, European Central Bank Governing Council member Joachim Nagel warned that consumer price growth in the euro zone is proving stubborn. “We are on a bumpy road, but we all know that the last mile is the most complicated one,” the Bundesbank president said.
In a separate development, the European Union’s bonds fell after MSCI Inc. said it won’t add the bloc’s debt to its range of government bond indexes.
Investors, however, are remaining confident in the equity market’s resilience despite the hawkishness of central banks.
The S&P 500 will climb to new highs regardless of what the Fed does, according to Bloomberg’s latest Markets Live Pulse client survey. Treasuries will also extend their rebound for a second-straight annual gain, according to a majority of the survey’s respondents.
“The positivity generated by easing US inflationary pressures is sending investors back into US markets,” said Peter Rosenstreich, head of investment products at Swissquote Bank SA Ltd. “I would still be overweight US stocks because I expect them to outperform longer term.”
In commodities, oil dipped after a three-day advance as investors weighed an unexpected build in US crude stockpiles and the higher-for-longer Fed rate outlook. Gold declined.
Key events this week:
-
Eurozone industrial production, Thursday
-
US PPI, initial jobless claims, Thursday
-
Tesla annual meeting, Thursday
-
New York Fed President John Williams moderates a discussion with Treasury Secretary Janet Yellen, Thursday
-
Bank of Japan’s monetary policy decision, Friday
-
Chicago Fed President Austan Goolsbee speaks, Friday
-
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
-
S&P 500 futures rose 0.1% as of 7:49 a.m. New York time
-
Nasdaq 100 futures rose 0.6%
-
Futures on the Dow Jones Industrial Average fell 0.3%
-
The Stoxx Europe 600 fell 0.7%
-
The MSCI World Index fell 0.3%
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro fell 0.2% to $1.0785
-
The British pound fell 0.2% to $1.2771
-
The Japanese yen fell 0.3% to 157.23 per dollar
Cryptocurrencies
-
Bitcoin fell 0.5% to $67,776.29
-
Ether fell 1.6% to $3,498
Bonds
-
The yield on 10-year Treasuries was little changed at 4.32%
-
Germany’s 10-year yield advanced one basis point to 2.54%
-
Britain’s 10-year yield advanced five basis points to 4.18%
Commodities
-
West Texas Intermediate crude fell 0.9% to $77.76 a barrel
-
Spot gold fell 0.9% to $2,305.06 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Allegra Catelli, Selcuk Gokoluk, Subrat Patnaik and James Hirai.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
