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U.S. equity futures slipped lower Wednesday, while bond markets extended their historic December rally and the dollar held gains against its global peers, as soft inflation data, as well as further indications of a resilient domestic economy, look to support the case for Federal Reserve interest-rate cuts.
Updated at 7:36 AM EST
Mortgage borrowing boost
U.S. mortgage rates fell firmly below 7% last week, data from the Mortgage Bankers’ Association indicated, taking 30-year home borrowing costs to 6.83%, the lowest levels since June amid the historic December bond market rally.
Related: Mortgage rates fall below 7% as housing market begins long-awaited rebound
Stock Market Today
Stocks extended their long autumn rally Tuesday, with the Dow hitting another record and the S&P 500 rising to within less than a percent of its January 2022 peak, following solid November housing-starts data and further bets by traders that interest-rate cuts are coming.
A key reading of domestic inflation — the Fed’s preferred Personal Consumption Expenditures Price Index gauge — is looming on Friday, which means investors are likely to focus on softening price pressures in Europe, with headline inflation falling to a two-year low in Britain and factory-gate (wholesale) inflation slowing more than expected in Germany.
The downside moves added more fuel to the global bond-market rally, which has seen U.S. 10-year-note yields fall the most since 2010, and boosted the case for Fed rate cuts in the early spring.
Benchmark 10-year notes were marked 4 basis points lower from last night’s close at 3.89% while 2-year paper slipped to 4.382%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.23% higher at 102.397 as both the pound and the euro retreated in the wake of their respective inflation readings.
Global oil prices were also active, with Brent Crude prices rising past the $80 mark for the first time in two weeks. Traders priced in the added costs of rerouting oil shipments from the Red Sea to the Cape of Good Hope following drone and missile attacks from Iran-backed Houthi rebels in Yemen.
Brent Crude contracts for February delivery were marked 87 cents higher at $80.15 per barrel. WTI futures contracts for January added $1.01 to trade at $74.95 per barrel.
On Wall Street, futures are indicating a modestly softer open, with the S&P 500 priced for a 9-point decline and the Dow Jones Industrial Average looking at a 31-point pullback. The tech-focused Nasdaq is priced for a 50-point decline.
In overseas markets, Europe’s Stoxx 600 was marked 0.06% higher in early Frankfurt trading, while Britain’s FTSE 100 rose 0.6% in London.
Overnight in Asia, Japan’s Nikkei 225 closed at a fresh 33-year high of 33,675.94 points, with a year-to-date gain of around 31%, following yesterday’s dovish Bank of Japan rate decision.
The regionwide MSCI ex-Japan benchmark, meanwhile, edged 0.17% into the close of trading.
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