U.S. equity futures were little-changed Tuesday, while Treasury bond held onto yesterday’s rally, as markets digest a mixed set of data underscoring the broader economy’s end-of-year momentum while eying a key inflation report later in the week.
Treasury yields moved firmly lower in yesterday’s session, taking benchmark 10-year notes to around 4.396% in overnight trading, following a weaker-than-expected reading for October new home sales as well as a report from the Dallas Federal Reserve showing softening manufacturing activity.
A solid, but by no means spectacular, $109 billion auction of two benchmark bonds, including a $54 billion sale of 2-year notes, added to the downward move in yields, with markets looking again to gauge both domestic and foreign demand in a $39 billion 7-year auction later in the session.
The soft economic data somewhat offset a firm reading of consumer spending over the Black Friday and Cyber Monday shopping period, with overall sales rising 2.5% from last year, according to Mastercard, amid a record surge in ‘buy now, pay later’ purchases from cash-strapped customers.
The figures, while indicative of an economy that is likely to avoid recession in the near-term, did little to suggest that inflation prospects will be stoked by consumer spending over the final months of the year and beyond, and traders continue to bet that the Fed has ended its rate-hiking cycle and will begin lowering borrowing costs in the spring of next year.
The CME Group’s FedWatch, in fact, puts the chances of a May rate cut at around 50/50, with notably higher odds that the reductions will begin in June.
Thursday’s reading of the Fed’s preferred inflation gauge, the core PCE price index, will go a long way towards confirming that view, as will a Friday speech from Fed Chair Jerome Powell at at Spelman College in Atlanta.
In the meantime, markets are likely to focus on comments from policymakers including Chicago Fed President Austan Goolsbee and boards member Christopher Waller and Michelle Bowman later in the session.
On Wall Street, stocks are set for a mixed open, with futures contracts tied to the S&P 500 indicating a 1 point opening bell dip and those linked to the Dow Jones Industrial Average suggesting a 29 points advance. The tech-focused Nasdaq is called 5 points higher.
In other markets, gold prices held near six-months highs at $2,014.75 per ounce in overnight trading, pegging the bullion at just $60 from the all-time highs it reached in 2020, while oil prices rebounded from yesterday’s slump ahead of Thursday’s OPEC+ meeting in Vienna.
Brent futures contracts for January delivery, the global pricing benchmark, were last seen 94 cents higher at $80.92 per barrel while WTI contracts for the same month, which are tightly-linked to U.S. gasoline prices, rose 95 cents to $745.81 per barrel.
In overseas markets, Europe’s Stoxx 600 was red for a second consecutive session following a warning on possible rate hikes from Bundesbank President Joachim Nagel, who echoed similar remarks from European Central Bank President Christine Lagarde yesterday.
Overnight in Asia, the region-wide MSCI Asia ex-Japan index was marked 0.44% higher into the close of trading, although stocks in Hong Kong were down 0.2% amid renewed concerns for China’s indebted property sector.
Japan’s Nikkei 225, which is on pace for a November gain of 8%, its best in three years, slipped 0.12% to end the session at 33,408.39 points.
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