Stock futures are little changed as traders anticipate higher rates

Fundstrat's Tom Lee expects a 20 percent rally this year

Stock futures were little changed on Tuesday due to concerns over higher rates among traders.

Futures tied to the Dow Jones Industrial Average fell 60 points, or 0.2%, while the S&P 500 fell less than 0.1%. Nasdaq-100 futures hovered just above the flat line.

Atlanta Federal Reserve President Rafael Biostic said on Monday that interest rates should rise above 5% and remain there for “a long time”. Meanwhile, San Francisco Fed President Mary Daly said the central bank should continue to raise rates at a slower pace. Treasury yields rose marginally on Tuesday.

The comments came ahead of a speech by Fed Chairman Jerome Powell scheduled for 9 a.m. ET.

Investors entered the new year worried that higher Fed rates could push the economy into recession. However, there are many growing bets that inflation is beginning to abate.

The Nasdaq Composite gained 0.6% on Wednesday, helped by a 6% rally in Tesla. Meanwhile, the Dow erased 304-point gains and closed nearly 113 points lower, while the S&P fell 0.1%.

Monday also marked the end of the first five trading days of 2023, during which the S&P 500 climbed 1.1%. According to a classic stock market indicator, such early strength could bode well for the rest of the year.

Fundstrat’s Tom Lee called this a “strong omen” and said the market is poised for a 20% rally this year.

The Fed wants financial conditions to “remain tight,” Lee said on CNBC’s “Closing Bell: Overtime.” “Dollar, stocks, bonds — all kind of easing. So they’re probably a little worried and they want to make sure that inflation is really dead. But one of the changes especially since October is that inflation is shooting up.” has been subject to.”

Lee said depending on how the CPI data fares on Thursday, the bond market could prompt the Fed to make a final rate hike before the February cut.

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