This post was originally published on this site
U.S. stock futures initially rose early Monday as traders started the new quarter in a positive mood, but surging Treasury yields halted the rally in its tracks.
How are stock-index futures trading
-
S&P 500 futures
ES00,
-0.14%
rose 1 point, or 0% to 4325 -
Dow Jones Industrial Average futures
YM00,
-0.16%
fell 9 points, or 0% to 33716 -
Nasdaq 100 futures
NQ00,
+0.02%
added 23 points, or 0.2% to 14890
On Friday, the Dow Jones Industrial Average
DJIA
fell 159 points, or 0.47%, to 33508, the S&P 500
SPX
declined 12 points, or 0.27%, to 4288, and the Nasdaq Composite
COMP
gained 18 points, or 0.14%, to 13219.
What’s driving markets
Early-session positivity has evaporated as rising bond yields again appear to take their toll on trader sentiment.
Investors initially on Monday adopted a more risk-on stance at the start of the final quarter of 2023, a seasonal period that tends to see gains for stocks, particularly as the year draws to a close.
It follows a tough September, when the S&P 500 endured its worst month of the year, down 4.9%, as 10-year Treasury yields surged to their highest level since 2007 amid concerns sticky inflationary pressures would cause the Federal Reserve to keep interest rates higher for longer.
“Welcome to Q4 with the markets relieved to see the end of September, and for that matter Q3, after a tough latter half to a quarter that promised a lot after a buoyant July,” said Jim Reid, strategist at Deutsche Bank in a note published early in Europe.
However, news that Washington had averted a potentially economy-damaging government shutdown steadily Treasury yields
BX:TMUBMUSD10Y
higher as the session progressed, with investors reasoning it was now more likely the Fed would raise borrowing costs again this cycle.
“Congress averted a shutdown, adopting a stopgap bill that keeps the government open through November 17th, meaning data releases (including Friday’s jobs report) will proceed as scheduled. That makes it more likely that Fed officials proceed with a 25bp hike at the November 1st meeting – which remains our base case,” said Richard Hollenhorst, economist at Citi.
Better news from China, where official data over the weekend showed the country’s manufacturing sector in September expanded for the first time in six months, initially helped the mood across global markets — though not China itself, which was shut for the Golden Week holiday.
Tom Lee, head of research at Fundstrat said he was constructive on stocks given the U.S. consumer and economy remain healthy, and this should help corporate profits to rise over coming quarters.
“We remain comfortable with the view that equities can rally into the end of 2023. There has been significant technical damage over the past 8 weeks, and this breakdown is not instantly reversed as we move into October. But…the
price level of the S&P 500 is approaching an area of attractive risk/reward,” wrote Lee in a note.
U.S. economic updates set for release on Monday include the S&P final manufacturing PMI for September, due at 9:45 a.m. Eastern, followed at 10 a.m. by the September ISM manufacturing survey, and August construction spending.
There are a number of Fedspeakers to start the week. Chair Jay Powell and Philadelphia Fed President Patrick Harker are expected to make comments at a community event in York, Pa at 11 a.m.. New York Fed President John Williams is due to speak at an environmental economics conference at 11:30 a.m., and President of the Cleveland Fed Loretta Mester is slated to talk at 19:30 at the 50 Club of Cleveland.
