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U.S. equity futures were little-changed from last night’s record close in early Tuesday trading, while currency and bond markets held steady, as investors looked to a series of labor market releases over the coming days to define the Federal Reserve’s rate path.
Stocks ended higher on Monday, with both the S&P 500 and the Nasdaq reaching fresh all-time highs, as markets continued their post-election rally powered by bets on business-friendly policies, resilient economic growth and a dovish Federal Reserve.
At least two legs of that bull market stool will be tested this week, however, with three key job market readings over the next three days leading into Friday’s crucial November non-farm payroll report.
A stronger labor market, tied with data showing record consumer spending and travel over the Black Friday weekend, could renew concerns that the Fed will need a longer timeframe to bring inflation back to its preferred 2% target, pushing rate cuts further into next year.
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Fed Governor Christopher Waller told an event in Washington last night that “policy is still restrictive enough that an additional cut at our next meeting will not dramatically change the stance of monetary policy”, although New York Fed President John Williams suggested more data monitoring is need before the next move can be determined.
Fed Chair Powell is likely to address those concerns when he speaks at the New York Times DealBook Summit on Wednesday, as are the slate of Fed officials due to speak over the coming days and into the central bank’s December 18 rate decision.
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The CME Group’s FedWatch pegs the odds of a December cut at around 72.5%, but has trimmed bets on 2025 reductions from four to around two and a half as inflation pressures continue to linger.
Benchmark 2-year Treasury note yields, the most-sensitive to interest rate moves, were last marked at a 4.184% heading into the start of the Tuesday trading session, with 10-year notes trading at 4.219%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.11% lower at 106.331.
On Wall Street, stocks are set for a muted open ahead of job openings data at 10:00 am Eastern time, with futures contracts tied to the S&P 500 priced for a 3 point opening bell gain.
Futures linked to the Dow Jones Industrial Average, meanwhile, suggest a 10 point dip while those tied to the tech-focused Nasdaq suggest a 23 point slip.
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In Europe, stocks were higher in the mid-day session, with the Stoxx 600 benchmark rising 0.46% , although focus remains on markets in France amid a vote of no confidence for the government of Prime Minister Michel Barnier and President Emmanuel Macron, which is expected later today.
Overnight in Asia, Japan’s Nikkei 225 closed at a three-week high, with tech stocks leading the advance, while the regional MSCI ex-Japan benchmark rose 1.12% into the close of trading.
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