Treasury yields have pulled back sharply from their highs amid expectations that the Federal Reserve has reached the end of its rate-hike campaign
U.S. stock index futures rose on Wednesday as investors awaited Fed Chair Jerome Powell’s speech at a conference to gauge his view on interest rates and the state of the economy.
Treasury yields have pulled back sharply from their highs amid expectations that the Federal Reserve has reached the end of its rate-hike campaign, helping the S&P 500 and the Nasdaq notch their longest streak of gains in two years on Tuesday.
Markets are now pricing in rate cuts as soon as in May, as per the CME Group’s FedWatch tool, with odds of a cut of at least 25 bps having increased to around 52 per cent, compared to nearly 41 per cent a week back.
Still, cautious comments from several central bank officials over the past few days have kept investors on edge, with Fed Governor Michelle Bowman flagging the possibility of further rate hikes given the strength of the U.S. economy.
All eyes will be on Powell’s opening remarks before the Federal Reserve Division of Research and Statistics Centennial Conference at 1415 GMT for more hints on how long U.S. monetary policy could stay restrictive.
The Fed Chair is also due to speak at another conference on Thursday.
One thing I would be interested to see is if he follows suit with a few other Fed speakers and pushes back a little bit against the loosening of financial conditions, said Ross Mayfield, investment strategy analyst at Baird.
Mayfield added: I am of the opinion that the Fed does not cut rates unless the economy slows substantially from here and potentially is already in a recession.