Nasdaq, S&P 500 Futures Lift-Off On Nvidia Boost: Market Shrugs Off Fed's Hawkishness And Bets On Rate Cuts Before Year-End, Says Analyst

Zinger Key Points
  • Financial markets are pricing in more than a 50-50 odds of a rate cut by the end of 2023.
  • This is despite Fed officials warning of 'higher rates for longer.'

U.S. stocks may start Thursday’s session on an upbeat note, as traders transitorily put economic worries on the back burner in the wake of some positive earnings reports.

Cues From Wednesday’s Trading:

The major averages closed Wednesday’s session on a mixed note as traders reacted to the Federal Open Market Committee meeting minutes that suggested Fed officials dogmatically held on to their hawkish biases.

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Stocks opened the session higher but reversed course and hit a low in late morning trading. After reversing course and peaking ahead of the FOMC minutes, the indices gave back their gains before closing mixed.

The Dow Industrials and the S&P 500 indices settled at fresh one-month lows. The latter managed to hold above 3,940, which LPL Chief Technical Strategist Adam Turnquist mentioned as the level that would be required to break the uptrend and the longer-term 200-day moving average.

Most S&P sectors moved to the downside, with the exception of consumer discretionary and material stocks.

U.S. Indices' Performance On Wednesday
Index Performance (+/-)   Value
Nasdaq Composite +0.13%   11,507.07
S&P 500 Index -0.16%   3,991.05
Dow Industrials -0.26%   33,045.09

Analyst Color:

Despite the hawkish FOMC minutes, the financial markets haven’t given up hopes for a Fed rate cut this year, analysts say.

“Following the release of the FOMC minutes, financial markets are pricing in one in three odds that the Fed raises the fed funds rate to above our peak target by July—up from one in four odds prior to the minutes’ release,” said Bill Adams, chief economist at Comerica Bank.

”Financial markets continue to price in better than 50-50 odds that the Fed begins to reduce interest rates by the end of this year.”

Futures Today

U.S. Futures' Performance On Thursday
Index Performance (+/-)  
Nasdaq 100 Futures +0.80%  
S&P 500 Futures +0.44%  
Dow Futures +0.23%  
R2K Futures +0.33%  

In premarket trading on Thursday, the SPDR S&P 500 ETF Trust SPY gained 0.45%, to $400.33, and the Invesco QQQ Trust QQQ climbed 0.78%, to $296.54, according to Benzinga Pro data.

Upcoming Economic Data:

The Labor Department is scheduled to release the weekly jobless claims report at 8:30 a.m. EST. The consensus estimate calls for the number of individuals claiming unemployment benefits to increase by 200,000 in the week ended Feb. 18, up from 194,000 in the previous week.

The Bureau of Economic Analysis will release its preliminary fourth-quarter GDP data, also at 8:30 a.m. EST. Economists widely expect the quarter-over-quarter real GDP growth estimate to be maintained unchanged from the advance estimate of 2.9%. Traders may also focus on the core personal consumption expenditure index component of the report, which is the Fed’s favorite inflation gauge.

The Chicago Federal Reserve is expected to release its national activity index for January at 8:30 a.m. EST.

Atlanta Fed President and Federal Open Market Committee member Raphael Bostic will speak at 10:50 a.m. EST.

The Energy Information Administration will release its weekly petroleum inventory report at 11 a.m. EST.

The Kansas Federal Reserve is due to release its regional manufacturing and composite indices for February at 11 a.m. EST.

The Treasury will auction 4-week and 8-week bills at 11:30 a.m. EST and 7-year notes at 1 p.m. EST.

Stocks In Focus:

  • Nvidia Corp. NVDA climbed over 8% in premarket trading after it reported forecast-beating results and issued positive guidance.
  • eBay Inc. EBAY tumbled over 5% in reaction to its quarterly results, while smaller rival Etsy Inc. ETSY rose about 6%.
  • Lucid Group Inc. LCID fell over 10% on its fourth-quarter revenue miss.
  • Alibaba Group Holding Limited BABA, DISH Network Corp. DISH, Moderna Inc. MRNA and Nikola Corp. NKLA are among the notable companies reporting their quarterly results ahead of the market open.
  • Block Inc. SQ and Carvana Inc. CVNA are among the companies reporting after the close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures were seen reversing course on Thursday. A barrel of WTI-grade crude oil traded up about 0.92% at $74.63. Meanwhile, the yield on the benchmark 10-year U.S. Treasury continued to hold high and hovered around 3.95%.

The Asia-Pacific markets ended mixed on Thursday, with most markets moving to the downside, while the Indonesian, New Zealand, South Korean and Taiwanese markets advanced. The Japanese market was closed for a public holiday.

European stocks were mixed in late morning trading on Thursday amid the release of eurozone inflation data that came in above expectations.

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