Stock futures edged lower on Tuesday as concerns about higher rates weighed on closely watched Federal Reserve chairman comments among traders.
Futures for the Dow Jones industrial average fell 130 points, or 0.4%. S&P 500 futures also fell 0.4%, while Nasdaq-100 futures fell 0.6%.
Atlanta Fed President Rafael Bostic said Monday that interest rates should rise above 5% and stay “longer.” Meanwhile, San Francisco Fed President Mary Daly said the central bank should continue raising rates, albeit at a slower pace. Treasury yields rose slightly on Tuesday.
The comments came ahead of Fed Chairman Jerome Powell’s speech at 9 a.m. on Tuesday. Investors will be panning his comments for tea leaves on how the central bank will respond next in an effort to curb inflation.
Investors entered the New Year worried that higher Fed rates could push the economy into recession. However, many are betting that inflation is beginning to slow.
The Nasdaq Composite posted a 0.6% gain on Wednesday, helped by a 6% rally in Tesla. Meanwhile, the Dow ended down nearly 113 points, erasing a 304-point gain, while the S&P slipped 0.1%.
Monday marked the end of the first five trading days of 2023, during which the S&P 500 gained 1.1%. That kind of initial strength, according to a classic stock market indicator Can say well throughout the year.
Fundstrat’s Tom Lee called this a “strong omen” and said the market is set for a 20% rally this year.
Lee said on CNBC that central bank monetary conditions “need to remain tight.” “Closing Bell: Overtime.” “The dollar, stocks, bonds — everything is weakening, so they’re a little bit worried, and they want to be sure that inflation is really dead. But one of the changes from October, specifically, is that inflation is coming down.”
Depending on how the CPI data fares on Thursday, the bond market could push the Fed to make February the last rate hike before cuts, Lee added. Investors will also watch Friday for big bank earnings and consumer sentiment data.