Market Optimism
After a Fed-induced selloff hit the market in the previous session, stock index futures are pointing to a higher open on Thursday. The Nasdaq 100 futures (NDX:IND) are up +0.5%, S&P futures (SPX) are up +0.3%, and Dow futures (INDU) are up +0.1%.
Fed Chief’s Reservations
Fed chief Jay Powell expressed skepticism about a March rate cut, stating it was unlikely. However, despite his comments, the market remains uncertain. Fed funds futures are still pricing in a 35% chance of a March move. The language used by Powell emphasizes the need for “greater confidence” in inflation trends, suggesting a lack of unanimity within the FOMC.
Interest Rates and Market Expectations
10-year Treasury yields (US10Y) fell 1 basis point to 3.95%, while the 2-year yield (US2Y) rose 1 basis point to 4.24%. The market is still pricing in six quarter-point rate hikes by the year-end, implying a possible rate adjustment at every meeting from May onwards.
Economic Data and Performance
Preliminary economic data presents a mixed picture. Initial jobless claims increased by 9,000 to 224,000, exceeding the consensus figure of 213,000. Meanwhile, U.S. worker productivity gains slowed in Q4, with a 3.2% Q/Q increase, surpassing the expected +2.3% but decelerating from Q3. The January ISM Manufacturing Index is also set to be released, with economists anticipating a dip to 47.2.
