Equity futures stabilized Thursday night after a rally on Wall Street, with all three major US equity indices closing sharply higher as investors pondered more about the way forward for interest rates and further sanctions against Russia.
Contracts on the S&P 500 followed the flatline. The S&P 500, Dow and Nasdaq each closed Thursday’s regular session up more than 1%. Despite some losses earlier this week, the S&P 500 and Nasdaq are headed for a second straight week of gains, if levels hold through Friday’s close.
Developments in Russia’s war in Ukraine remained front and center on Thursday as President Joe Biden met with NATO allies in Europe. The United States imposed a new round of sanctions against Russia and pledged to provide more aid to Ukraine. Biden also said he would support Russia’s withdrawal from the G20.
Despite the ongoing geopolitical dispute, stocks remained relatively resilient this week in the face of upbeat economic data and a chorus of comments from Federal Reserve officials reiterating the central bank’s more hawkish path to controlling inflation. In one of the latest data points underscoring the ultra-tight labor market, weekly jobless claims hit the lowest level since 1969 last week as companies retained existing workers amid shortages widespread labor.
Against this backdrop – and with inflation at the highest level in 40 years – central bankers have intensified discussions about tightening monetary policy. Chicago Federal Reserve Chairman Charles Evans said on Thursday that he was “open” to the idea of raising interest rates by 50 basis points at an upcoming Fed meeting if necessary. This echoes remarks from other Fed policymakers, including San Francisco Fed President Mary Daly, who said earlier this week that if the Fed were to do 50 basis points, then “50 is what we’re going to do.” Earlier this week, Fed Chairman Jerome Powell also signaled his willingness to roll out a 50 basis point larger-than-usual rate hike to fight inflation, if deemed necessary.
As the prospect of higher interest rates and tighter financial conditions were met with investor dismay and market volatility earlier this year, traders began to digest the outlook for a Fed more belligerent. Still, some strategists have warned that volatility will likely still be in the near-term charts.
“We remain quite bullish on the market as a whole, but I think the volatility is here to stay,” said Ross Mayfield, investment strategy analyst at Baird, Yahoo Finance Live said Thursday.
“As for catalysts, there’s a lot going on there. There’s war in Ukraine. The market isn’t moving that much in the headlines day-to-day, but that doesn’t mean it’s still could not be a significant catalyst for this event, either up or down,” Mayfield added. “The Fed – we have a pretty good idea of what they plan to do, but any hint as we get closer to May of a rate hike of around 50 basis points or a reduction in the balance sheet or what that might look like could be a catalyst. “
Others have come up with a similar take.
“There was quite a bit of bearish sentiment. We are seeing fund managers holding excess cash – more than normal, almost 6% on average in cash,” Loreen Gilbert, CEO of WealthWise Financial, told Yahoo Finance Live. “I don’t think the volatility is over. While we’re happy with some good upside market rallies, we’re also looking to see what’s going to happen going forward.”
6:10 p.m. ET Thursday: Stock futures open little changed
Here’s where major stock index futures opened on Thursday night:
S&P 500 Futures Contracts (ES=F): +2.25 points (+0.05%) to 4,514.75
Dow futures (JM=F): +31 points (+0.09%) to 34,635.00
Nasdaq futures contracts (NQ=F): -2.75 points (-0.02%) to 14,761.00
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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