(Reuters) – Futures tracking U.S. stock indexes gained on Friday as investors remained upbeat in a week marked by economic data signaling a soft landing for the economy and the Federal Reserve’s hints of lower interest rates next year.
The Fed left interest rates unchanged on Wednesday, acknowledging slowing inflation and indicated lower borrowing costs were on the horizon, causing the Dow Jones Industrial Average to notch its second straight record high close on Thursday.
Money markets see a 79% chance of at least a 25-basis point rate cut as soon as March 2024, up from about 50% before Wednesday’s policy announcement, while almost fully pricing in another cut in May 2024, according to CME Group’s FedWatch tool.
“Because we are seeing clear disinflation taking place, the market is starting to think about cutting cycles in the same way it was thinking about the hiking cycle,” said Sphia Salim, head of European rates research at BofA Global Research.
“We are far from neutral and inflation is moving fast, so maybe central banks are behind the curve and ultimately may need to converge back to neutral quite rapidly.”
The dovish turn of events caused equities to rally recently, with the benchmark S&P 500 and the tech-heavy Nasdaq eyeing six straight weeks of gains.
U.S. Treasury yields fell below 4% to multi-month lows, with yield on the benchmark 10-year Treasury note last standing at 3.9129%. [US/]
Markets will now parse the S&P Global Composite Flash PMI data for December, due after the opening bell.
At 5:32 a.m. ET, Dow e-minis were up 160 points, or 0.43%, S&P 500 e-minis were up 13.25 points, or 0.28%, and Nasdaq 100 e-minis were up 51.5 points, or 0.31%.
Among stocks, Alteryx added 1.4% before the bell as Piper Sandler upgraded the analytics automation firm’s shares to “neutral” from “underweight”.
Costco Wholesale rose 1.5% after the retailer topped Wall Street estimates for first-quarter results due to demand for cheaper groceries.
First Solar and Enphase Energy added 2.4% and 3.4%, respectively, as Jefferies started coverage of the solar companies with a “buy” rating.
(Reporting by Shristi Achar A in Bengaluru; Additional reporting by Shashwat Chauhan; Editing by Shounak Dasgupta)
