Positive Start for Wall Street
Wall Street index futures kicked off October on a positive note after the U.S. Congress averted a government shutdown, while investors awaited comments from Federal Reserve Chair Jerome Powell for clues on the central bank’s interest-rate path.
Congress Passes Stopgap Funding Bill
The Congress passed a stopgap funding bill on Saturday with overwhelming Democratic support after Republican House Speaker Kevin McCarthy backed down from an earlier demand by his party’s hardliners for a partisan bill.
Investors, meanwhile, await Powell’s comments at 11 a.m. ET, along with Philadelphia Fed President Patrick Hasker’s remarks, at a roundtable discussion with local employers and small business owners to discuss the efforts to grow the local economy. Later in the day, Cleveland Fed President Loretta Mester will speak on the outlook for the U.S. economy.
Central Bank Rate Trends
“We believe the rates set by major central banks may be nearing a peak – a positive for equity markets – but the lagged effects of this potent rate-hiking cycle still present the risk of recessions, as we have seen in Germany this year,” said Helen Jewell, CIO at BlackRock Fundamental Equities, EMEA.
Interest Rates and Yields
Yields on the 10-year Treasury note edged higher on Monday, with the 2-year note, which best reflects interest rate expectations, still above 5%. Wall Street’s main indexes ended the third-quarter lower on fears of interest rates staying higher for longer after a rally in prices pushed to near $100 per barrel, fueling inflation.
Market Impact of Inflation
Data last week showed a better-than-expected but still-high inflation, while investors adjusted their portfolios on the final trading day of a weak quarter. A slew of economic data including U.S. manufacturing activity and the crucial monthly jobs reports at the end of the week is on investors’ radar for more clues on the Fed’s interest-rate path.
At 4:56 a.m. ET, Dow Jones futures were up 138 points, or 0.41%, S&P 500 futures were up 21.75 points, or 0.5%, and Nasdaq futures were up 104.25 points, or 0.7%. In premarket trading, crypto-linked stocks including Riot Platforms, Marathon Digital, and U.S.-listed shares of Hut 8 Mining were up between 8% and 12% after bitcoin hit near two-month highs. Shares of Coinbase (NASDAQ:) climbed 5.3% after the c
In conclusion, the positive start to October for Wall Street, following the Congress’s successful passage of a stopgap funding bill, has ignited optimism in the financial markets. Investors are eagerly awaiting insights from Federal Reserve Chair Jerome Powell and other central bank officials, hoping to gain clarity on the future interest-rate trajectory. While the prospect of central banks nearing a rate peak is viewed positively, concerns about the lagged effects of rate hikes and inflation persist. The market’s performance in the coming days will be closely tied to economic data releases and developments in the cryptocurrency space. As the month unfolds, Wall Street remains on the lookout for potential shifts in the financial landscape.