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U.S. equity futures bumped higher Thursday as investors looked to claw back a portion of yesterday’s selloff triggered by hawkish remarks from Federal Reserve Chairman Jerome Powell and looked to another round of Magnificent 7 tech earnings after the closing bell.
Stocks were hit hard late in the Wednesday session as Powell, following up from the Fed’s decision to hold interest rates steady at a 22-year high of between 5.25% and 5.5%, pushed back on market bets that the central bank would start easing in the coming months.
Powell told reporters in Washington that the economy is a “long way” from a soft landing, where inflation pressures ease and recession is avoided, noting the resilient job market, solid end-of-year economic growth and elevated price pressures.
“Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that,” Powell said.
“When you ask me about ‘in the near term,’ I’m hearing that as March,” he added. “I would say I don’t think that’s – that’s probably not the most likely case, or what we would call the base case.”
Fed Chairman Jerome Powell pushed back on market bets for a March rate cut.
Traders are now pricing in just a 35% chance that the Fed begins the first of its three projected rate cuts in March, according to the CME Group’s FedWatch, although the odds of reductions in May are pegged at around 95%.
The prospect of high rates for a longer period boosted the U.S. dollar index 0.35% higher to 103.632 against a basket of its global currency peers in overnight trading, although Treasury bond yields were largely steady.
Benchmark 10-year notes were pegged at 3.946% heading into the early New York session, with 2-year notes at 4.241% even after a boost in auction-sale sizes tied to the Treasury’s quarterly refunding report.
On Wall Street, investors are likely to switch focus back toward the Magnificent 7 tech stocks, which have powered much of the S&P 500’s 3.25% advance so far this year. Apple (AAPL) – Get Free Report, Amazon (AMZN) – Get Free Report and Meta Platforms (META) – Get Free Report all are slated to report December-quarter earnings after the closing bell.
Analysts are looking for Apple to earn $2.10 a share on revenue of $117.9 billion, but its near-term outlook is likely to be far more important for the stock’s performance.
Wall Street sees Meta posting a bottom line of $4.95 a share, a threefold improvement from fourth-quarter 2022, with revenue rising around 21% to $39.14 billion.
For Amazon, analysts are expecting the e-commerce giant to likely post record revenue of $166.1 billion, a staggering total powered in part by 13.1% sales growth at Amazon Web Services, with profits of around $29.3 billion.
On Wall Street, stocks are looking at a modestly positive open to start the month, with weekly jobless claims data at 8:30 am Eastern time, followed by manufacturing activity data 90 minutes later.
Futures contracts tied to the S&P 500 are indicating a 21 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 55 point bump. The tech-focused Nasdaq is called 110 points higher.
Overnight in Asia, stocks tracked Wall Street’s late-session declines, with Japan’s Nikkei 225 falling 0.76% and the regionwide MSCI ex-Japan index marked 0.07% lower.
In Europe, the Stoxx 600 benchmark slipped 0.2% in early Frankfurt trading following inflation data showing price pressures eased to 2.8% in January, a dip from the 2.9% level recorded at the end of last year.
In Britain, the FTSE 100 was marked 0.36% higher following the Bank of England’s January policy decision in London, which left its key lending costs unchanged at 5.25% following a 6-3 vote by its rate-setting committee.