U.S. stock market index futures were down Tuesday as concern over higher rates lingered among traders awaiting comments from a closely followed Federal Reserve leader. Futures tied to the Dow Jones Industrial Average shed 142 points, or 0.4%. S&P 500 futures fell also fell 0.4%, while Nasdaq-100 futures dropped 0.6%. Atlanta Fed President Raphael Bostic said Monday that interest rates should rise above 5% and stay there for a “long time.” 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. Those comments came ahead of a speech by Fed Chair Jerome Powell slated for 9 a.m. ET Tuesday. Investors will parse his comments for tea leaves into how the Fed will respond next in its attempt to cool inflation. Investors came into the new year worried that higher Fed rates could tip the economy into a recession. However, many appear to be mounting bets that inflation is starting to ease. The Nasdaq Composite on Wednesday posted a 0.6% gain, helped by a 6% rally in Tesla. Meanwhile, the Dow erased a 304-point gain and ended down almost 113 points, while the S&P fell 0.1%. Monday also marked the end of the first five trading days of 2023, during which the S&P 500 gained 1.1%. According to a classic stock market indicator, that kind of early strength could bode well for the rest of the year. Tom Lee of Fundstrat called it a “strong omen” and said the market is set up for a 20% rally this year. The Fed wants financial conditions “to stay tight,” Lee said on CNBC’s “Closing Bell: Overtime.” “Dollar, stocks, bonds – everything’s kind of easing so they’re probably a little worried and they want to be sure inflation is in fact dead. But one of the changes especially since October is that inflation has been under shooting.” Depending on how consumer price index data fares Thursday, the bond market could push the Fed to make February the last rate hike before cuts, Lee added. Investors will also watch for big bank earnings and consumer sentiment data Friday. Asia-Pacific markets traded mixed after the Nasdaq Composite extended gains for a second day on Wall Street. Technology stocks helped the index skirt losses Monday as traders added to bets that inflation may be easing. The Nikkei 225 rose 0.78% to close its session at 26,175.56 and the Topix gained 0.27% to 1,880.88 as consumer prices in Japan’s capital city rose 4% in December on an annualized basis, beating expectations for a 3.8% rise. The Japanese yen slightly weakened to 132.17 against the U.S. dollar, which reached a seven-month low earlier in the week. The S&P/ASX 200 fell 0.28% in Australia to close at 7,131. The Kospi struggled for direction and last traded marginally higher to close at 2,351.31. Investors digested South Korea’s latest current account balance data from November, which shifted from a surplus to a deficit for the first time since August. The Hang Seng index in Hong Kong fell 0.43% in its final hour of trade. In mainland China, the Shanghai Composite also fell 0.21% to 3,169.51 and the Shenzhen Component rose 0.5% to 11506.79. Oil prices were stable on Tuesday as the market awaited the Federal Reserve’s plans for rate hikes to gauge the impact on the economy and fuel demand. Brent futures for March were up 26 cents, or 0.3%, at $79.91 a barrel. U.S. West Texas Intermediate crude rose 37 cents, or 0.5%, to $75. Gold traded near an 8-month high Tuesday as the precious metal’s strong start to 2023 continued, buoyed by lower yields and a weaker dollar. Spot gold hit $1,881.5 per troy ounce on Monday, its highest point since May 9, before cooling off as U.S. Federal Reserve officials signaled further aggressive monetary policy action to combat inflation. Gold was trading around $1,876/oz at 7 a.m. ET.
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