U.S. stock futures rose an inch ahead of Powell’s speech

U.S. stock futures edged up slightly on Tuesday, although trading was muted ahead of Federal Reserve Chairman Jerome Powell’s announcement.

How stock index futures are traded
  • futures on S&P 500 ES00,
    +0.12%
    rose 9 points, or 0.2%, to 4061.

  • Dow Jones Industrial Average YM00 futures,
    +0.01%
    rose 48 points, or 0.1%, to 33499.

  • Nasdaq 100 NQ00 futures,
    +0.25%
    advanced 48 points, or 0.4%, to 12372

On Monday, the Dow Jones Industrial Average (DJIA),
+0.12%
up 40 points, or 0.12%, to 33431, S&P 500 SPX,
+0.07%
rose 3 points, or 0.07%, to 4048, while the Nasdaq Composite COMP,
-0.11%
fell 13 points, or 0.11%, to 11676.

What drives the markets

Markets remain focused on the monetary policy outlook and hence trading is muted ahead of Powell’s Senate address on Tuesday, which is scheduled to begin at 10:00 am ET.

Powell will also be polled by the House of Representatives on Wednesday ahead of the always-awaited official jobs data on Friday.

“Investors are generally unwilling to take the plunge in front of two vital indicators… while most markets are treading water,” said Richard Hunter, head of markets at Interactive Investor.

“Fed Chairman Powell’s speech to Congress and the nonfarm payrolls report are undoubtedly the highlights of the week. Together, these two events will provide the most up-to-date information on the near past, present and future of the world’s largest economy and will be critical in determining market sentiment,” Hunter added.

The S&P 500 is roughly in the middle of the 3800 to 4200 range, which it has been wandering around for about four months, with equity investors appearing to have been able to absorb the recent uptick in TMUBMUSD10Y bond yields.
3.941%,
which comes after a torrent of economic resilience data that could force the Fed to maintain higher borrowing costs for a longer time.

However, some analysts fear that the market remains vulnerable to any indication that interest rates may need to rise faster than expected.

“For the most part, the Fed has been mostly hawkish lately; until there was a significant deviation from the 25 bps path. But any such significant turnaround is likely to push the US dollar up and significantly reduce risk appetite,” said Stephen Innes, managing partner at SPI Asset Management.

[Mean]adhering to the “higher, longer” approach, but in increments of 25 basis points, this would help contain rate volatility and relatively support risk markets,” Innes added.

US economic news due Tuesday includes January wholesale inventories at 10:00 am and January consumer credit at 3:00 pm.

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