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U.S. equity futures moved higher Friday, setting up the Dow for its eighth consecutive session gain, as lower Treasury yields tied to bets on an autumn Fed rate cut continue to support a bullish global market.
Stocks ended higher Thursday, with the S&P 500 now less than 1% from its March record high, after data from the Labor Department showed weekly jobless claims jumped to highest levels since last summer.
The surprise tally, when paired with last week’s softer-than-expected April jobs report, suggests cracks in the labor market that could ease inflation pressures and validate the case for Fed rate cuts in September.
A trio of big Treasury auctions this week, including benchmark sales of 10-year notes and 30-year bonds, also drew solid demand from foreign investors that soothed concerns over the government’s surging deficit.
The S&P 500, which is up 9.31% for the year, is less than 1% from the all-time high it reached on March 20.
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Benchmark 10-year note yields eased to 4.453% in the overnight session, while 2-year notes were pegged at 4.817% following the muted jobless claims reading.
The CME Group’s FedWatch tool, meanwhile, has nudged the odds of a September Fed rate cut to around 68.5%, although San Francisco Fed President Mary Daly cautioned last night that their is still “considerable uncertainty” in the overall inflation backdrop.
“In a scenario where inflation doesn’t make much further progress, then it’s not appropriate to start adjusting the rate unless we see the labor market faltering, which it’s not showing any signs of doing,” Daly told an event at George Mason University in Fairfax, Va.
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With the bulk of the first quarter earnings season behind it, investors are now likely to shift focus to next week’s initial inflation readings for the month of April, which will include the key CPI reading on May 15.
Heading into the start of trading on Wall Street Friday, stocks are set for a solid set of opening bell gains, with the Dow looking to extend its win streak to eight consecutive sessions.
Futures contracts tied to the S&P 500, which is now up 3.54% for the month, suggest an early 22 point gain while the Dow is called 145 points higher.
The tech-focused Nasdaq, which is up 4.4% for the month, is likely to get another upside boost from falling Treasury yields and is called 95 pints higher.
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In overseas markets, Britain’s FTSE 100 hit a fresh all-time high again in early London trading, and was last marked 0.83% higher on the session, following yesterday’s dovish Bank of England rate decision and data showing the best first quarter GDP growth rate in nearly three years.
The region-wide MSCI ex-Japan index, meanwhile, rose 0.87% in early Frankfurt trading.
Overnight in Asia, Japan’s Nikkei 225 ended 0.41% higher at 38,229.11 points in a follow-on rally from last night’s close on Wall Street, pegging the index flat for the week following two prior weekly advances.
The regional MSCI ex-Japan index was marked 0.97% higher into the close of trading.
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