US equity futures recouped earlier falls to put Wall Street on course for a firmer open, lifted by signals the Federal Reserve is preparing to downshift its rate-tightening campaign and hopes that tech firms can escape the worst of the earnings downturn.
(Bloomberg) — US equity futures recouped earlier falls to put Wall Street on course for a firmer open, lifted by signals the Federal Reserve is preparing to downshift its rate-tightening campaign and hopes that tech firms can escape the worst of the earnings downturn.
While markets struggled to build on Friday’s momentum that boosted the underlying indexes, futures for the tech-heavy Nasdaq rose around 0.3%. In premarket moves, shares in enterprise software giant Salesforce rose on news of a substantial stake purchase by hedge fund Elliott Investment Management. Western Digital shares also gained after a Bloomberg report that the company and Kioxia are progressing in their merger talks.
Equity investors focus is now on the earnings season, especially on US tech giants. Hopes for better-than-expected results were fanned by Netflix Inc., which last week beat revenue forecasts and added far more subscribers than expected. Microsoft Corp. will be the next big tech name to report, releasing results on Tuesday.
“A lot of tech earnings are coming out of the US as we go through the week, and I think that might temper some of the enthusiasm we’ve seen for risk over the last month,” Luke Hickmore, investment director at abrdn, said in an interview with Bloomberg TV.
Hickmore said markets were ignoring some of the signals emanating from the economy and the Fed, with the central bank still on course to tighten borrowing costs. Companies are culling tens of thousands of jobs to cope with the demand slowdown, while many remain concerned about ongoing wrangling in Congress over the debt ceiling.
“The market seems to be ignoring that and saying, ‘we want to buy, we want to buy, there’s lots of cash on the sidelines, let’s get it involved,’” Hickmore said. “Companies are going to find their earnings coming under increasing pressure as the year goes on.”
The dollar held just off nine-month lows after last week’s slew of weak economic data, and dovish signals from Fed officials such as Governor Christopher Waller, who said on Friday he backed moderation in the size of rate increases. By contrast, European Central Bank policymakers Klaas Knot and Peter Kazimir spoke in favor of continuing with half-point interest-rate increases.
Europe’s Stoxx 600 benchmark was steady, having risen nearly 7% this year, almost double the S&P 500’s gain. Meanwhile, the euro strengthened to the highest since April 2022. The single currency is up almost 2% this year against the greenback, after falling nearly 6% last year.
“The market has decided recession risks were overdone for Europe and you can see that in the outperformance of European stocks and the euro,” Rabobank strategist Jane Foley said.
Earlier, Asian shares enjoyed a strong session, albeit in holiday-thinned trade, with Japan’s Topix index up as much as 1%. The yen also gained 0.5% against the dollar.
Japanese 10-year yields slipped after the central bank acted to stem the rise in bond yields by offering banks ¥1 trillion yen ($7.7 billion) of collateralized loans. Yields held aroumd 0.375%, well below policymakers’ 0.5% ceiling.
Elsewhere, oil rose on the back of a weaker dollar and expectations of rising energy demand in the wake of China’s reopening.
Key events this week:
- Earnings for the week include: Abbott Laboratories, American Airlines, American Express, AT&T, Blackstone, Boeing, Colgate-Palmolive, Freeport-McMoRan, General Electric, Intel, International Business Machines, Johnson & Johnson, LVMH Moet Hennessy Louis Vuitton, Mastercard, Nokia, SAP, Southwest Airlines, Texas Instruments, Verizon Communications, Visa
- Euro area consumer confidence, Monday
- US Conference Board leading index, Monday
- ECB President Christine Lagarde speaks, Monday
- PMIs for US, euro area, UK, Japan, Tuesday
- Richmond Fed Manufacturing, Tuesday
- ECB President Christine Lagarde speaks, Tuesday
- US MBA mortgage applications, Philadelphia Fed non-manufacturing activity, Wednesday
- US fourth-quarter GDP, new home sales, initial jobless claims, good trade balance, durable goods, wholesale inventories, retail inventories, Thursday
- Japan Tokyo CPI, Friday
- US personal income/spending, University of Michigan consumer sentiment, pending home sales, Friday
Here are some of the main market moves:
Stocks
- S&P 500 futures rose 0.2% as of 8:29 a.m. New York time
- Nasdaq 100 futures rose 0.3%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0877
- The British pound fell 0.2% to $1.2367
- The Japanese yen fell 0.5% to 130.29 per dollar
Cryptocurrencies
- Bitcoin rose 1.3% to $22,884.28
- Ether rose 0.1% to $1,629.94
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.50%
- Germany’s 10-year yield advanced one basis point to 2.19%
- Britain’s 10-year yield declined two basis points to 3.36%
Commodities
- West Texas Intermediate crude rose 0.9% to $82.39 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jan-Patrick Barnert, Brett Miller and Francine Lacqua.
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