Market News
A less pessimistic Fed helps to pull index futures higher again
The Federal Reserve’s July meeting delivered a 25bps hike as expected, but a less pessimistic tone and a focus on data dependency boosted US index futures. Optimism surrounding falling inflation and steady economic growth supports a positive market outlook.
A Less Pessimistic Fed Helps to Pull Index Futures Higher Again
Key Takeaways:
• The Fed delivered a 25bps hike as expected, with a meeting-by-meeting approach.
• Signals of reduced economic pessimism suggest the Fed may be nearing the end of its tightening cycle.
• US index futures responded positively, with earnings season set to drive further market momentum.
A Unanimous 25bps Hike, With Few Surprises
While the July Federal Reserve meeting brought no surprises in terms of rate decisions, subtleties in the communication reflected a more optimistic outlook. The FOMC statement noted economic activity expanding at a “moderate” rather than “modest” pace, signalling a slight upgrade in economic assessment.
Fed Chair Jerome Powell emphasised a meeting-by-meeting approach, refraining from committing to further hikes. He also shared that Fed staff no longer anticipate a recession, a positive shift for corporate prospects.
Data Will Be Crucial for the September Decision
The Fed’s reliance on incoming data makes the next two months critical. Key metrics include Nonfarm Payrolls, CPI inflation, and the Q2 Employment Cost Index. Falling inflation could reinforce the case for the Fed to pause, particularly as all inflation metrics now sit below the Fed Funds rate.
Markets Firming Views of 2024 Rate Cuts
Fed Funds futures continue to reflect a peak rate of 5.42%, with expectations for rate cuts starting in 2024. The CME Group’s FedWatch tool places an 88% probability on a May 2024 cut. Treasury yields have softened, and the USD has turned lower, aligning with this outlook.
US Index Futures Turn Higher Again
The improved economic outlook and reduced recession fears have bolstered US equities:
• E-mini S&P 500 Futures: The futures have broken to their highest levels since March 2022, with resistance at 4631 in sight. Momentum indicators remain strong, with support at 4557 and 4498 marking key levels for a sustained rally.
• E-mini NASDAQ 100 Futures: While the NASDAQ has lagged, it is gaining momentum, supported by strong earnings from tech firms like Meta Platforms. Resistance lies at 16063, with higher lows at 15484 and 15432 providing a foundation for further gains.
As earnings season unfolds and inflation data emerges, market sentiment remains upbeat. Investors are eyeing the prospect of a Fed pause and a stable economic outlook to sustain the rally in US index futures.
Please see our Terms of Use for additional details and restrictions.
Permitted products: Tradeday traders are allowed to trade listed Futures products only; we allow trading on the following exchanges: CME, CBOT, NYMEX, and COMEX. Trading of Stocks, Options, Forex, Cryptocurrency, and CFDs are not permitted nor available in our program or platforms.
Risk Disclosure: Futures trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. You should only put capital at risk that you can afford to lose. Past performance is not necessarily indicative of future results.
Evaluation Challenge Disclaimer: The trader pass rate of the evaluation program was 28.2% between October 2023 and March 2024. The evaluation is a realistic simulation of trading under actual market conditions and is difficult to pass even for experienced traders. Testimonials appearing on this website may not be representative of other clients or customers and are not a guarantee of future performance or success.
Simulated Trading; CFTC Rule 4.41: During the Evaluation Challenge, users trade in simulated markets. Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.
Refund Policy: TradeDay works with a number of third-party service providers that require immediate commitment from TradeDay when an account is opened, as such we are unable to offer a refund after purchase. If you are unsure that TradeDay is the right place for you we strongly recommend you take the 14-day free trial where there is no obligation to purchase, and no credit card is needed to sign up. All membership fees are considered used in full.
TradeDay is not registered in any capacity with the SEC or CFTC.28.2