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U.S. equity futures bumped higher Wednesday, building on yesterday’s sharp pullback in Treasury yields, as investors continue to bet that the Federal Reserve will be able to execute a so-called ‘soft landing’ for the world’s biggest economy by taming inflation while avoid recession.
Stocks were mixed throughout most of the Tuesday session, with the Nasdaq ending modestly higher by the close of trading, as benchmark 10-year Treasury note yields fell to the lowest levels since early September following softening jobs data and solid reading of November services activity.
The Labor Department’s October Jolts report showed a big decline in open positions, to the lowest levels since March of 2021, while the final reading of the ISM services-sector survey showed modest improvement in the biggest driver of U.S. growth over the month of November.
Both readings added to bets that the economy is cooling enough to slow inflation but not to the point where it slips into recession over the coming months.
Stocks are starting to reflect that view heading into the final trading weeks of the year. That’s particularly with respect to the market’s key volatility gauge, CBOE Group’s VIX index, which is holding near five-year lows, last trading at 12.83 in the overnight session.
At that level, traders are expecting daily swings of around 0.79%, or 36 points, for the S&P 500 over the next 30 days, down from around 57 points in late October.
Global oil prices are also slipping lower, despite efforts from Saudi Arabia and other OPEC members to talk up the efficacy of their recent production cuts, as looming recessions in Europe and a fading recovery in China add to mounting demand concerns in the coming year.
Brent crude contracts for February delivery were marked 51 cents lower in the early New York session at $76.71 per barrel while WTI contacts for January fell 54 cents to a near five-month low of $71.78 per barrel, helping U.S. gasoline prices fall to $3.216 per gallon, according to AAA data.
On Wall Street, stocks are looking at a modestly positive start to the session ahead of ADP’s National Employment report prior to the opening bell. Futures contracts tied to the S&P 500 indicate a 7 point gain and those linked to the Dow Jones Industrial Average are priced for a 50 point advance.
The tech-focused Nasdaq, meanwhile, is called 35 points higher thanks in part to premarket gains for Nvidia (NVDA) – Get Free Report and Tesla (TSLA) – Get Free Report.
In overseas markets, Europe’s Stoxx 600 was marked 0.3% higher in early Frankfurt trading. The euro slipped to 1.0786 against the U.S. dollar on renewed European Central Bank rate cut bets, which helped Germany’s DAX index hit a fresh record 16,578.15 points at the start of trading.
Overnight in Asia, the regionwide MSCI ex-Japan benchmark rose 0.6% into the close of trading, thanks to a mixed rebound for stocks in China. Japan’s Nikkei 225 ended the session 2.04% higher as the index rebounded from its biggest single-day decline in six weeks.
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