U.S. equity futures traded higher Friday, following on from yesterday’s late-session rally on Wall Street, as investors continue to bid-up stocks in the face of an array of market uncertainties, highlighted by the Federal Reserve’s challenge to execute a soft landing for the world’s largest economy.
Treasury bond yields were active again in overnight trading, taking 10-year notes to 2.683%, the highest since 2019, and pegging the gap over 2-year notes at around 16 basis points in a notable reversal of the ‘inversion’ seen earlier this week.
The Atlanta Fed’s GDPNow tracker suggests the economy is growing at a modest 0.9% clip, while the CME Group’s FedWatch tool suggests an 81% change of a 50 basis point rate hike next month and a 50/50 change of follow-on hikes at both the June and the July policy meetings that would take the Fed Fund rate to a range of 1.75% to 2% by mid-summer.
Whether those moves suggest a more bullish outlook on the economy remains to be seen: Russia’s war on Ukraine continues to disrupt food and energy prices, China’s Covid surge is extending delays in global supply chains, notably in the tech and auto sector, higher interest rates are slowing growth in the housing market and corporate earnings are set to slow markedly from the torrid post-pandemic rebound recorded last year.
Still, with the Fed pledging to reduce its $9 trillion balance sheet by $1 trillion a year, selling $95 billion in assets to the market each month, while moving to ‘expeditiously’ raise interest rates in order to arrest the fastest domestic inflation rates in forty years, stocks appear to be the best alternative at present in market of rising interest rates and extreme commodity price volatility.
On that front, global oil markets edged lower in early Friday trading as traders prepare for the release of 240 million barrels of crude — or more than a million each day between now and the end of the year — as part of coordinated plan between the U.S. and its allies to mitigate the impact of supply disruptions and sanctions on Russian energy exports.
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WTI crude futures for May delivery were marked just 1 cent higher at $96.02 per barrel, setting up a decline of around 3% on the week, while Brent contracts for June fell 26 cents to $100.32 per barrel.
On Wall Street, futures contacts tied to the Dow Jones Industrial Average indicating a 150 point opening bell decline while those linked the S&P 500, which is down 5.6% for the year, are priced for a 18 point advance. Futures linked to the tech-focused Nasdaq are looking at a 60 point opening bell gain.
Tesla (TSLA) – Get Tesla Inc Report shares were active in pre-market trading after nudging in to positive territory for the year on last night’s close, as CEO Elon Musk promised to deliver “massive scale full self-driving” during the opening of a new production facility in Austin, Texas.
In what Tesla called a ‘Cyber Rodeo’ celebration to mark the opening of ‘Giga Texas’, a $1.1 billion factory outside of Houston, which CEO Elon Musk said would be the highest volume car factory in the U.S.
Robinhood Markets (HOOD) – Get Robinhood Markets, Inc. Class A Report shares tumbled 4% after analysts at Goldman Sachs cut their rating on the retail trading platform to sell, arguing the group could struggle to reach its goal of turning a profit by next year.
Twitter (TWTR) – Get Twitter, Inc. Report edged 1.35% lower after the social media group invited employees to a question-and-answer session with its newest board member, Elon Musk, who also happens to be both its biggest shareholder and the world’s richest man.
Spirit Airlines (SAVE) – Get Spirit Airlines, Inc. Report shares, meanwhile, moved higher after the low-cost airline agreed to talks with JetBlue Airways (JBLU) – Get JetBlue Airways Corporation Report on its unsolicited $3.6 billion takeover offer.