U.S. Stock Futures and Bond Prices Weaken Amid Fed Rate Cut Expectations

U.S. stock futures opened on a slightly negative note on Monday, accompanied by a weakening of bond prices. The market sentiment has cooled down after the initial excitement over the potential for Federal Reserve interest rate cuts.

Stock Futures Trading Updates

  • S&P 500 futures (ES00) fell 11.50 points, or 0.2%, to 4,589
  • Dow Jones Industrial Average futures (YM00) dropped 62 points, or 0.1%, to 36,241
  • Nasdaq-100 futures (NQ00) slipped 53.25 points, or 0.3%, to 15,970

Recent Market Performance

On Friday, the Dow Jones Industrial Average (DJIA) closed at 36,245.50 after gaining 294.61 points, or 0.8%. The S&P 500 (SPX) also experienced growth, ending at 4,594.63 with a gain of 26.83 points, or 0.6%. This marked the highest close for the S&P 500 since March 30, 2022. The Nasdaq Composite (COMP) reached a closing point of 14,305.03 after climbing by 78.81 points.

The past week witnessed significant milestones in the market, including the highest close of the year for the S&P 500 and the Dow’s achievement of crossing the 36,000 mark for the first time since January 2022. These accomplishments were fueled by expectations of Federal Reserve rate cuts next year, which have caused Treasury yields to decline.

Yields Show Signs of Creeping Higher

Yields have started to climb on Monday, as indicated by the 10-year note BX:TMUBMUSD10Y, which rose by 3 basis points to reach 4.246%. Surprisingly, yields witnessed a significant drop last Friday, even after Federal Reserve Chairman Jerome Powell dismissed rate-cut speculations and made it clear that the central bank is prepared to pursue rate hikes if necessary.

Inflation Data and Fed Comments Boost Rate Cut Expectations

Last week, encouraging inflation data, coupled with comments from Fed Gov. Christopher Waller, took rate cut expectations to new heights. The hopes were further reinforced by a disheartening report on manufacturing from the Institute for Supply Management published on Friday.

Focus on Upcoming Data to Support Rate Cut Case

Investors are eagerly anticipating important data releases this week, which will provide additional support for the case of a rate cut. The nonfarm payrolls figures for November are expected at the end of the week. With investors forecasting a decrease in U.S. job openings and fewer than 200,000 job additions last month, any further drop in these numbers would strengthen the arguments against the Fed taking a hawkish stance on the market. Higher wages on a month-on-month basis could potentially counterbalance negative jobs data.

Gold Prices Surge Amid Rate Cut Hopes and Middle East Tensions

The optimism regarding a potential rate cut by the Fed, combined with increasing tensions in the Middle East, propelled gold prices to a new high on Sunday (GC00, -0.18%). However, on Monday, gold prices began to retreat. Meanwhile, Bitcoin (BTCUSD, +3.61%) experienced a surge above $41,000, reaching a level that had not been seen since May 2022.

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