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U.S. equity futures edged lower Friday, while Treasury yields held steady and the dollar extended declines, as Wall Street looked to close out its best week of the year on bets that the Federal Reserve is engineering a soft landing for the world’s biggest economy.
Stocks ended firmly higher across the board last night, with the S&P 500 rising more than 1.6% to close at the highest level since July 23 following a stronger-than-expected retail sales report and data showing another pullback in week jobless claims.
The benchmark has gained around 3.7% so far this week, its best advance since November, while megacap tech stock rebounds have lifted the Nasdaq more than 5%.
Following on from a muted July inflation reading, which showed headline price pressures falling below the 3% mark for the first time in three years, investors are now growing increasingly confident that the Fed will be able to tame inflation pressures without inducing a near-term recession.
Soft landing bets are driving stocks higher into the mid-August break.
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The Atlanta Fed’s GDPNow forecasting tool, which was updated yesterday, indicates a current quarter growth rate of 2.4%, while bets on a September Fed rate cut of 25 basis points are holding at 70.5%, according to the CME Group’s FedWatch.
Benchmark 10-year Treasury note yields were last marked at 3.884% heading into the start of the New York trading session, with 2-year notes modestly higher at 4.060%.
Related: Recession forecasts crushed as economy defies doomsayers
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.16% lower at 102.810, on track for its third weekly decline and its longest losing streak in five months.
Heading into the start of the trading day on Wall Street, the S&P 500 which has an August gain of 0.38%, is priced for an opening bell dip of around 3 points.
The Dow Jones Industrial Average, meanwhile, is priced for a 3 point gain while the Nasdaq is called 8 points higher.
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In Europe, the regional Stoxx 600 benchmark rose 0.46% in early Frankfurt trading and is on pace for its best week since May, while Britain’s FTSE 100 slipped 0.42% lower in London, snapping a five-day winning streak but also on track for its best week since early spring.
Overnight in Asia, Japan’s Nikkei 225 surged 3.64% in a follow-on rally from last night’s firm close on Wall Street, while the region-wide MSCI ex-Japan index was marked 1.79% higher into the close of trading.
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