(Bloomberg) — US equity futures edged higher Friday after the previous day’s losses that were triggered by expectations the Federal Reserve’s first interest rate cut will be delayed to December.
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Contracts for the S&P 500 and the Nasdaq 100 indexes rose about 0.2%, with Micron Technology Inc., Microchip Technology Inc and Advanced Micro Devices Inc., all rising in premarket trading as Nvidia Corp.’s blockbuster earnings kept investors bullish on artificial intelligence. Europe’s Stoxx 600 index slipped 0.5%, playing catch-up with the previous day’s Wall Street drop, which was the biggest this month.
The market mood has turned more sombre after Thursday’s stronger-than-expected US business activity data forced traders to push back rate-cut expectations by a month. Data Friday appeared to cement that view, showing durable goods orders for April rising 0.7%, compared with expectations for a 0.8% drop.
Bloomberg’s dollar index slipped but is on track for its biggest weekly gain since early April, while rate-sensitive Treasury two-year yields rose but held just shy of the three-week highs above 4.95% hit on Thursday. Earlier this week, minutes of the Fed’s May meeting showed policymakers are in no rush to cut rates, with some even seeing a need for more restrictive policy.
“What we have is this repricing of rate cuts,” said Kenneth Broux, a strategist at Societe Generale. “Two-year yields are again within touching distance of 5%, so the debate on whether US yields have peaked is still alive.”
For now, profits at larger US companies appear resilient to the higher-for-longer rates backdrop, offering encouragement to equity bulls. For broader positive momentum to reverse, “we’ll need to see if there’s a repricing of Fed cuts to hikes but the bar for that is still very high,” Broux said.
The Fed minutes and robust data have put MSCI’s global benchmark on track for its first weekly decline in five, and some strategists, including Bank of America Corp. strategist Michael Hartnett are warning the rally is at risk of overheating. Barclays Plc strategists said stock gains are starting to “look tired.”
Among other individual stock movers, Workday Inc. fell 12% in US premarket trading after the software company cut revenue forecasts. Discount retailer Ross Stores Inc. jumped after boosting earnings forecast.Story continuesIn Europe, DS Smith Plc slid amid uncertainty over International Paper Co.’s plan to acquire the UK packaging company, and Bayer AG fell after Chief Executive Officer Bill Anderson said lawsuits over its Roundup weedkiller are an “existential” threat to the company.
Action overall could be muted, with investors unwilling to place big bets before a long weekend in the US and UK. There is also trepidation that the shift to a faster settlement cycle in the US could trigger some failed trades after Wall Street returns from Monday’s holiday.
In commodities, oil held near its lowest level in over three months, amid concerns over demand as the US summer driving season kicks off.
Key events this week:
Canada retail sales, Friday
Germany GDP, Friday
US durable goods, consumer sentiment, Friday
Fed’s Christopher Waller speaks, Friday
Some of the main market moves:
Stocks
The Stoxx Europe 600 fell 0.5% as of 1 p.m. London time
S&P 500 futures rose 0.3%
Nasdaq 100 futures rose 0.3%
Futures on the Dow Jones Industrial Average rose 0.1%
The MSCI Asia Pacific Index fell 0.8%
The MSCI Emerging Markets Index fell 0.7%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.2% to $1.0842
The Japanese yen was little changed at 157.03 per dollar
The offshore yuan was little changed at 7.2587 per dollar
The British pound rose 0.2% to $1.2719
Cryptocurrencies
Bitcoin fell 0.6% to $67,320.18
Ether fell 1.2% to $3,710.51
Bonds
The yield on 10-year Treasuries was little changed at 4.48%
Germany’s 10-year yield was little changed at 2.60%
Britain’s 10-year yield was little changed at 4.27%
Commodities
Brent crude fell 0.3% to $81.10 a barrel
Spot gold rose 0.4% to $2,339.02 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu, Chiranjivi Chakraborty and Selcuk Gokoluk.
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