Futures on the S&P 500 index have reversed course following an early gain of nearly 0.3%. Futures on the tech-heavy Nasdaq 100 index levelled down after chipmakers rose in premarket trade, led by Nvidia Corp., which gained more than 2.5% on quarterly revenues above estimates.
Dollar Strengthened Against Major Currencies
The Dollar strengthened against major currencies, and 10-year Treasury rates inched higher. There was no change in a vital part of the U.S. yield curve that has been keenly scrutinized for signs of an impending recession in the world’s largest economy.
Equities paused their multi-day rally on Thursday morning as more extensive and robust U.S. economic data and a slew of Fed presenters lessened hopes the U.S. central bank might halt its rate-hiking loop earlier than expected. It is a set of circumstances which has played out recurrently in global markets over the past few weeks.
The senior economist of First Abu Dhabi Bank, Simon Ballard, warned investors in a note. He stated that “any time global markets seek to rise based on assumptions that the conclusion of the Fed’s tightening ambitions may be in sight.” FOMC policymakers will provide a new section of the hawkish narrative.
Fed speakers have been sending the message that they have further to eliminate price pressures. Despite inflation merely beginning to drop after reaching decades-high levels and a barometer of U.S. retail sales expanding at the quickest rate in eight months.
Mary Daly, president of the Federal Reserve Bank of San Francisco, has said that pausing rate rises is “off the table.” Meanwhile, John Williams, president of the Federal Reserve Bank of New York, stated that threats to financial stability should not be considered.
U.S. Consumer Spending Decreases
The most extraordinary inflation in almost four decades is just one more indicator that the world’s largest economy is losing speed. On Wednesday, Target Corp. reported results that fell short of analysts’ projections, citing a decrease in U.S. consumer spending as the cause.
As Ballard put it, “the overall macro picture for the American economy is characterized by fragile strength.” He suggested that the Federal Reserve should slow its rate of gradual tightening before reaching a plateau. Investors’ attention went back to worries about the demand outlook in light of the slowing economic growth, and oil prices continued to fall.
Before Chancellor Jeremy Hunt’s budget release, the British Pound dropped in value and bond rates increased. Hunt will likely adhere to fiscal orthodoxy and outline expenditure cutbacks and tax increases to close the budget gap. Pound has recovered after announcing a hefty mini-budget just at the end of September. But investors are taking a step back for fear of being caught off guard.