Thursday saw a downturn in U.S. stock index futures following a persistent rise in Treasury yields, just a day after a significant inflation report led to a sharp decline on Wall Street, casting doubt on the possibility of a Federal Reserve rate cut in June.
The previous session's sharp decline was triggered by March's consumer price data, which came in higher than anticipated. This development has led market participants to speculate that the Fed might postpone interest rate reductions until September.
The release of the Fed's March meeting minutes added to the market's anxieties, revealing concerns among officials that inflation progress might be faltering. This suggests that a prolonged period of stringent monetary policy may be necessary to control inflation rates effectively.
UBS Global Wealth Management has revised its expectations, now predicting the Fed will initiate rate cuts in September, a shift from its earlier June forecast. Meanwhile, trading data from the CME FedWatch Tool indicates a 41% likelihood of a rate cut occurring in July.
Following Wednesday's surge, yields on government bonds have remained high, with the 10-year note rate closely monitoring its highest point since November at 4.5457%.
Attention is now turning towards the March producer price index and weekly unemployment claims, set to be released later today. These figures are crucial for assessing the health of the global economy's largest player.
Market sentiment towards monetary policy easing within the year has cooled, with current expectations showing only a 40 basis point reduction in 2024, a stark decrease from the 150 basis points anticipated at the year's start, according to LSEG data.
Investors are also keenly awaiting insights from Federal Reserve officials, including New York's John Williams, Richmond's Thomas Barkin, and Atlanta's Raphael Bostic, for further clues on the direction of interest rates.
The upcoming first-quarter earnings season is set to gain momentum on Friday, with major banks such as JPMorgan Chase & Co (JPM, Financial), Citigroup (C, Financial), and Wells Fargo (WFC, Financial) scheduled to announce their quarterly performances.
Early today, Dow e-minis saw a decrease of 91 points or 0.23%, S&P 500 e-minis fell by 12.75 points or 0.24%, and Nasdaq 100 e-minis dropped by 37.5 points or 0.21%.
In other news, biotech firm Alpine Immune Sciences (ALPN, Financial) is set to be acquired by Vertex Pharmaceuticals (VRTX, Financial) in a deal valued at approximately $4.9 billion in cash, causing a significant 36.3% surge in Alpine's stock, whereas Vertex experienced a 2.1% decline. Additionally, Rent the Runway (RENT, Financial) saw a 36.9% increase after announcing a positive outlook for the full year, and Albemarle (ALB, Financial) enjoyed a 1.7% rise following an upgrade from Berenberg to "buy."
