(Bloomberg) — U.S. stock futures pointed to gains at the Wall Street open as investors looked past a jump in borrowing costs that cooled market sentiment earlier in the week.
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Contracts on the S&P 500 rose 0.3%, suggesting the underlying gauge may pare its first weekly decline in seven weeks. Treasury yields fell for a second day, sending the 10-year interest rate higher by about a tenth of a percentage point in the week.
Traders’ attention is turning to next week’s US economic data, including the monthly jobs report, for new clues about the scope of interest rate cuts by the Federal Reserve. With the November 5 presidential election approaching, some analysts expect the stock market to strengthen if Donald Trump wins, while others warn it could reignite inflation and slow the pace of Fed easing.
“Markets are at least smelling a Republican sweep, and possibly an election/Senate landslide,” Steven Uth, chief investment officer for equities at Fed Hermes, wrote in a note. “If this happens, and we think it very well could happen, we expect the modest rally we have seen since July to gain strength. A Trump win would likely favor old economy financials, industrials, energy and small-cap stocks.
Strategists at Bank of America Corp., led by Michael Hartnett, highlighted other pre-election trades. They said investors continue to buy gold as a hedge against inflation and populism, while other trending themes – such as selling bonds and buying AI stocks – are holding up.
Bank of America’s Hartnett says bets on gold are rising ahead of the US elections
The precious metal hit a record high on Wednesday and gold funds recorded their largest weekly inflow since July 2020, according to Bank of America strategists. The yield on US 10-year government bonds briefly broke 4.2% this week, the highest level since July, while shares of US chip company Nvidia Corp reached an all-time high.
Meanwhile, the European Stoxx 600 index fell on Friday after lackluster results from companies including French cognac maker Remy Cointreau SA and Mercedes-Benz Group AG. The regional stock index is heading down more than 1% during the week.
“It has been a volatile situation,” said Vidya Anant, senior portfolio manager and head of sustainable equity funds in Europe at DWS Asset Management. “We’re seeing a bit of risk-off behaviour, and no one wants to move into stocks at this point especially right before the election.”
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