The U.S. stock market is expected to face challenges on Friday as investors grapple with rising bond yields and ongoing geopolitical tensions. Federal Reserve Chairman Jerome Powell's recent comments are also being carefully considered.
- S&P 500 futures (ES00, -0.10%) remained flat at 4,302.75
- Dow Jones Industrial Average futures (YM00, -0.08%) rose by 3 points to reach 33,550
- Nasdaq-100 futures (NQ00, -0.17%) experienced a decline of 11.25 points and settled at 14,878
On Thursday, the Dow Jones Industrial Average (DJIA) concluded at 33,414.17, marking a decrease of 250.91 points or 0.7%. The S&P 500 (SPX) also fell by 36.60 points or 0.8%, finishing at 4,278. The Nasdaq Composite (COMP) experienced a 1% decrease of 128.12 points and closed at 13,186.17.
As the 10-year Treasury yield approached the significant psychological level of 5% on Thursday, major indexes were on track for weekly losses.
Currently, the yield on the 10-year note (BX:TMUBMUSD10Y) stands at 4.944%, reflecting a decrease of 4 basis points on Friday. However, this week has seen an overall surge of 31 basis points from Monday's 4.616%.
During a speech in New York on Thursday, Powell adopted a cautious outlook but did not dismiss the possibility of further interest rate hikes. He also suggested that higher Treasury yields could aid the Fed in combating inflation by tightening financial conditions.
The Recent Bond Selloff: A Closer Look
Retail sales data, along with a strong nonfarm payroll read and higher-than-expected inflation data, has been attributed as the cause behind the recent bond selloff. This trend has further raised expectations of a more hawkish approach from the Federal Reserve. Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, highlights this correlation in a note to clients.
A Note on Federal Reserve Activity
Cleveland Fed President Loretta Mester is scheduled to speak at 12:15 p.m., marking the last scheduled speaker before the blackout period leading up to the rate decision on November 1st.
Corporate Earnings to Watch
American Express (AXP) will release their earnings report ahead of the market open. In the coming week, investors can look forward to earnings reports from big tech players Alphabet (GOOGL), Microsoft (MSFT), and Amazon.com (AMZN).
The Impact of the Israel-Hamas Conflict
Investor sentiment has also been affected by the ongoing conflict between Israel and Hamas. Oil prices have seen an increase as concerns grow over a potential ground invasion by the Israeli military. Palestinians in Gaza have reported heavy strikes in the southern region and have been instructed to evacuate. Meanwhile, a large Israeli town near the Lebanese border has also begun evacuations.
In light of recent events, West Texas Intermediate crude is up 1% to $89.39 a barrel, while gold has climbed $12.80 to $1,993.30 per ounce.
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