U.S. equity futures remained relatively flat on Wednesday, following the lowest close on Wall Street in over a month. Investors are closely monitoring the impact of China’s slowing economic recovery on global growth. However, they are still optimistic about the domestic economy and are betting on a soft landing. Solid retail sales in July, particularly in the key control group reading, have fueled hopes that consumers are managing the Federal Reserve’s rate hikes and taking advantage of the tight labor market.
However, concerns have been raised that the rush in spending may necessitate another rate hike by the Fed before the end of the year to control inflation. Benchmark 10-year Treasury bond yields reached a 2023 high of 4.274% on Tuesday before settling at around 4.188% in overnight trading. The market is eagerly awaiting the release of the minutes from the Fed’s July policy meeting for further insights. The Atlanta Fed’s GDPNow forecasting tool shows the broader economy growing at a 5% pace, following a 2.4% advance in the previous three months.
Rate traders do not anticipate another rate hike in September, with a 90.5% chance that rates will remain steady, according to the CME Group’s FedWatch tool. However, there are still bets on a final increase in November and December. Wall Street futures indicate a slight decline, led by bank and energy stocks, following a sell-off the previous day. Fitch Ratings’ warning of potential downgrades and concerns about China’s weakening economy impacting crude oil demand have contributed to this cautious outlook. S&P 500 futures suggest a 1 point decline at the opening bell, Dow Jones Industrial Average futures indicate a 2 point dip, and Nasdaq futures are down by 2 points.
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