(Bloomberg) — The dollar slipped and U.S. stocks were expected to recover from Wednesday's decline as attention returned to possible interest rate cuts by the Federal Reserve and other central banks.
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While Europe's Stoxx 600 index fell, following Wall Street's weak close, futures for the S&P 500 and Nasdaq 100 rose more than 0.5%. Indices appear poised to recover from a sell-off that saw them suffer their worst declines in weeks. The dollar continued its downward trend against other Group of 10 currencies, while 10-year U.S. Treasury yields – which have fallen more than 40 basis points this month – remained just below five-month lows.
Some market watchers blamed so-called zero-day, or ODTE, options for Wednesday's swoon in U.S. stocks, noting that high “put” volumes likely caused option holders to sell the underlying stocks. However, many argue that the overall picture of slowing inflation and bets on interest rate cuts should allow markets to continue to recover.
“If you look at tightening cycles throughout history, once the market is convinced the Fed is done, you see a pretty strong rally in bonds,” said Matt Stucky, portfolio manager at Northwestern Mutual Wealth Management. “Recoveries due to relief that the Fed is no longer a major headwind may last for a while.”
Citigroup Inc. strategists advised bracing for pullbacks, adding that investors should “expect volatility, but with an eventual Fed reversal as the north star.”
Philadelphia Fed President Patrick Harker reiterated his belief in a rate cut on Wednesday, saying it was important for rates to continue falling. However, he warned the central bank not to move too quickly and not “immediately”.
Traders will assess new economic data, including U.S. GDP and jobless claims numbers expected later on Thursday, with the latter expected to be up slightly from the previous week. Nike Inc.'s earnings are likely to provide insight into the state of affairs for U.S. consumers.
The story goes on
Friday brings British GDP data, US consumer sentiment and the so-called core personal consumption expenditures price index – the Fed's preferred inflation indicator.
Among individual share movers, Vodafone Group Plc rose more than 2% in London after Bloomberg reported that Swisscom AG was exploring a bid for the company's Italian business. In New York premarket trading, Micron Technologies Inc. rose more than 6% after quarterly revenue beat forecasts, while Boeing Co. rose as China reportedly approved the first delivery of a 787 jet since April 2021.
Cryptocurrency-related stocks also rose premarket as Bitcoin extended gains and traded above $44,000 on Wednesday.
In commodities, oil prices held steady after three days of gains as rising U.S. production curbed the threat of Houthi attacks on ships in one of the world's most important waterways.
Important events this week:
US GDP, Initial Jobless Claims, Conf. Leading board index, Thursday
Nike results, Thursday
Inflation in Japan, Friday
UK GDP, Friday
U.S. personal income and spending, new home sales, durable goods, University of Michigan consumer sentiment index, Friday
Some of the key moves in the markets:
Shares
S&P 500 futures rose 0.5% at 7:15 a.m. New York time
Nasdaq 100 futures rose 0.7%
Futures on the Dow Jones Industrial Average rose 0.4%
The Stoxx Europe 600 fell 0.6%
The MSCI World Index fell 0.1%
Currencies
The Bloomberg Dollar Spot Index fell 0.3%
The euro rose 0.3% to $1.0979
The British pound rose 0.2% to $1.2661
The Japanese yen rose 0.6% to 142.71 per dollar
Cryptocurrencies
Bitcoin rose 1.5% to $44,103.51
Ether rose 4.5% to $2,277.88
Tie up
The 10-year Treasury yield rose three basis points to 3.88%
The yield on 10-year German government bonds has hardly changed at 1.97%.
The 10-year UK government bond yield rose three basis points to 3.55%
raw materials
West Texas Intermediate crude fell 0.2% to $74.05 a barrel
Spot gold rose 0.1% to $2,033.75 an ounce
This story was produced with support from Bloomberg Automation.
– With support from Chiranjivi Chakraborty.
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