REUTERS: Major Wall Street indexes were expected to open higher on Friday as signs of slowing economic growth and falling commodity prices dampened expectations about how aggressively the Federal Reserve will raise interest rates. interest in containing inflation.
Global financial markets have been rocked this month by fears that rapid rate hikes by major central banks could cause a sharp economic slowdown, with the benchmark S&P 500 index confirming a bear market last week as it was down 20% from its January closing peak.
Thursday’s data showed U.S. business activity slowed significantly in June, prompting investors to cut bets on where interest rates could peak.
Falling commodity prices also eased worries about runaway inflation, with copper prices heading for their biggest weekly drop in a year and crude oil set for a second weekly drop.
“Conversations about the likely slowdown in the U.S. economy, which could dampen the hawkishness of the Fed, combined with falling commodity prices and bond yields – these are reasons investors cite for why we could experience a near-term rebound,” said Sam Stovall, chief investment strategist at CFRA Research in New York.
“Still, I don’t think that’s the final bottom.”
The Fed’s commitment to fighting high inflation is “unconditional,” Chairman Jerome Powell told lawmakers on Thursday, a day after saying it was not trying to cause a recession, but that it was ” definitely a possibility.”
Major equity indices looked set to post their first in four weekly gains, with healthcare, real estate and utilities – among sectors seen as safer bets in times of economic uncertainty – outperforming so far in the week.
Market heavyweights such as Apple Inc. and Tesla rose 0.9% and 0.5% in premarket trading. Rising interest rates hurt stocks of mega-cap growth companies as their valuations are more dependent on future earnings.
As of 8:45 a.m. ET, Dow e-minis were up 208 points, or 0.68%, S&P 500 e-minis were up 27.5 points, or 0.72%, and e-minis Nasdaq 100 were up 90.25 points, or 0.77%.
The University of Michigan’s June US consumer sentiment survey and new home sales data will be released later today.
FedEx Corp. rose 3.4% after the parcel delivery company released a stronger-than-expected full-year profit forecast despite slowing global shipping demand.
Bank stocks were mixed after the Federal Reserve’s annual “stress test” exercise showed lenders had enough capital to weather a severe economic downturn.
Citigroup Inc. slipped 0.9% and Bank of America Corp. fell slightly, while Morgan Stanley gained 1%.
Zendesk Inc. climbed 28.1% after the software company announced it would be acquired by a group of buyout firms led by Hellman & Friedman LLC and Permira in a 10.2-valued deal billions of dollars.