Wall Street and European stock futures rose; As investors prepare for an action-packed week. Key events include the release of US consumer price data on Tuesday, which may confirm that the battle for inflation is far from over, dashing hopes for the Fed’s interest rate pivot.
Contracts in the “Standard & Poor’s 500” rose by 0.3%, while contracts in the heavy “Nasdaq 100” index advanced 0.49%, indicating a recovery in the basic index after its first weekly loss in 2023. The company, “Sorrento Therapeutics”, declined in one trading session. Ahead of the market, after the drug development company filed for Chapter 11, bankruptcy protection in Texas. The European Stoxx 600 index rose through construction, industrial goods and consumer stocks, while energy and real estate underperformed.
The 10-year Treasury yield rose
Treasurys were range-bound after a sell-off in US government debt on Friday, which sent the 10-year Treasury yield up 7 basis points. The dollar’s strength gauge stabilized after rising earlier.
Investors are re-evaluating how high US interest rates will rise this year; Where inflation and jobs data are likely to remain hot later this week. This has fueled bets that the Fed’s rate will peak at 5.2% in July, up from less than 5% a month earlier.
“We certainly continue to be very cautious about equities,” Nanette Hechler Faid-Herby, chief investment officer at Credit Suisse International Wealth Management, told Bloomberg TV.
She added, “We find at the moment that there is a disconnect in assessments against interest rates by the Federal Reserve – and also by other central banks – that will be for the rest of the year.”
Patrick Harker, President of the Federal Reserve Bank of Philadelphia, was the last central bank governor to unveil expectations for interest rates to rise above 5%, after a drumbeat of comments last week that included a prediction from Neil Kashkari, President of the Federal Reserve Bank of Minneapolis, that “ The level will reach 5.4%.”
The stock is ready for sale
Meanwhile, strategists at Morgan Stanley considered that “US stocks are ready to sell after early pricing, in light of a temporary pause in raising interest rates by the Federal Reserve.”
“While the recent move higher in final interest rates supports the notion that the Fed may remain constrained for longer than estimated, the stock market refuses to accept this reality,” a team led by Michael Wilson said in a note.
“Deteriorating fundamentals, combined with Federal Reserve hikes that come at the same time as stagnant earnings, predicts that stocks will bottom out this spring,” predicts Wilson, the top-ranked strategist in last year’s institutional investor survey. The strategic analysts said: “The price is disconnected from reality, as it was during this bear market.”
The yen fell to more than 132 against the dollar after falling on Friday, as a result of news reports that “Kazuo Ueda will be chosen as the next governor of the Bank of Japan.” Investors initially interpreted the decision as “a hard choice.” These gains were curtailed after Ueda spoke to reporters, saying that “BoJ stimulus must remain in place.” The Japanese government is scheduled to officially announce the appointment of the new governor of the Bank of Japan, on Tuesday.
Traders are also closely watching geopolitical developments after the Pentagon shot down an unidentified object that tracked it over Michigan, according to US officials familiar with the matter. This was the fourth time in 8 days that a high-flying balloon or vehicle had been shot down over the United States or Canada.
Elsewhere, oil stabilized after its decline with the rise of the dollar and the resumption of exports from a major Turkish port. Likewise, the spot gold price decreased by 0.2%, to $1861.95 an ounce. US gold futures fell 0.1% to $1,872.20. (bloomberg)