Nasdaq in line for fresh 9-month high amid hopes Fed rate hikes are at an end

Nasdaq in line for fresh 9-month high amid hopes Fed rate hikes are at an end

U.S. stock futures rose on Thursday as bulls continued to be emboldened by hopes the Fed is now done raising interest rates.

How are stock-index futures trading

On Wednesday, the Dow Jones Industrial Average fell 57 points, or 0.17%, to 33562, the S&P 500 declined 19 points, or 0.46%, to 4119, and the Nasdaq Composite dropped 77 points, or 0.63%, to 12180.

What’s driving markets

Wall Street was looking to extend its latest gains, with the tech-heavy Nasdaq Composite in line for a fresh nine-month high, as investors continued to welcome evidence that U.S. inflation is cooling and that the Federal Reserve’s raising of borrowing costs was at an end.

“Markets rallied after the CPI release, with U.S. equities and bonds advancing as investors grew in confidence that the Fed would finally pause their rate hikes,” said Jim Reid, strategist at Deutsche Bank.

“At first glance the reaction might have seemed surprising, given that core CPI was still firm. But from a market perspective, several details in the report pointed to a more durable slowdown in inflation, which was music to investors’ ears after having repeatedly underestimated its persistence over the last couple of years,” Reid added.

U.S. stocks have made little headway over the past year or so as the Fed embarked on one of the sharpest monetary tightening cycles in its history as inflation last June hit a four-decade high of 9.1%.

Now, with hopes the Fed may even begin cutting rates by the end of the year, the S&P 500 is once again moving up toward the top of the 3,800 to 4,200 range it has inhabited for about six months.

Equity bulls will hope to see the easing inflation narrative confirmed when the April producer price index report is released at 8:30 a.m. Eastern. Weekly initial jobless claims will be published at the same time.

However, some analysts noted that any new advance for U.S. equities may be constrained by lingering concerns about the health of the banking system and the looming debt ceiling deadline.

“While moderating inflation is good news for U.S. stocks, there is far too much background noise, including debt ceiling risks and lingering U.S. regional banking concerns, for investors to get their mojo on truly,” said Stephen Innes, managing partner at SPI Asset Management.

Minneapolis Fed President Kashkari will speak at 8:45 a.m. and Fed Governor Waller will make comments at 10:30 a.m.

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