Scott Olson
Stock index futures pointed to a higher open as the Netflix results kept growth-stock momentum going.
S&P futures (SPX) +0.5%, Nasdaq 100 futures (NDX:IND) +0.7% and Dow futures (INDU) +0.2%.
The Communications Services (XLC) sector was up 1% premarket, with Netflix (NFLX) enjoying a post-earnings gain of more than 8%.
Rates moved lower in the wake of comments from former Fed governor James Bullard that supported an early rate cut. Odds of a quarter-point cut in March rose back above 50% from the low-40s yesterday.
The FOMC “don’t want to get into the second half of 2024, and inflation’s already at 2% and you still haven’t moved the policy, right? That would be too late,” Bullard told a Wall Street Journal podcast.
The 10-year Treasury yield (US10Y) fell 4 basis points to 4.10%. The 2-year yield (US2Y) fell 7 basis points to 4.32%.
But the “5yr (US5Y) part of the curve trades rich in absolute terms, given the ongoing inversion of the 2/5yr segment,” ING said. “Indeed this richness attached to the 5yr is indicative of a bond market that is not taking an imminent rate cut seriously.”
Shortly after the start of trading, the preliminary January S&P Global U.S. PMI numbers arrive. The forecasts are for the manufacturing index to stay steady at 47.9 and the services PMI to dip to 51.
“Surveys attract media attention because if you assume the survey does what it says it does, it can produce a more dramatic story,” UBS’ Paul Donovan said. “However, survey evidence has been a progressively less reliable description of reality across various measures.”
“It is easier to answer a survey with perception rather than reality (reality requires thought),” he said. “This helps explain why consumer surveys report more inflation than exists – US vending machine inflation is over 13% y/y, distorting inflation perceptions (falling television prices leave perceptions unaltered).”
“If survey response rates fall, people who fill in surveys are more likely to be strange. What motivates the dwindling numbers of respondents to fill in surveys? Loss aversion, in a different form. Bad news is more powerful than good news, so those who want to complain have an incentive to fill in a survey.”