Stock index futures were on the rise, suggesting a positive start to the trading day on Monday, following a new record in the broader market.
Tech Sector Boost
Nasdaq 100 futures (NDX:IND) showed a 0.6% increase, while S&P futures (SPX) were up by 0.3% and Dow futures (INDU) rose by 0.1%. The positive trend was particularly noticeable in the Information Technology (XLK) and Communications Services (XLC) sectors, where all “Magnificent 7” stocks were showing gains premarket.
“Risk was briefly shaken by central bankers pushing back on the market in the first half of last week as rate expectations and yields moved higher,” Deutsche Bank’s Jim Reid noted. “Although yields continued to move higher in the second half, risk fought back and we saw a decoupling between rates and equities that is potentially the biggest test of the very tight relationship the two have seen since August (both bearish and bullish).”
“So although 10yr yields are now up +23bps in 2024, the S&P 500 closed at an all-time high on Friday, the first since January 2022.”
Rates eased back slightly, with the 10-year Treasury yield (US10Y) falling by 4 basis points to 4.11% and the 2-year yield (US2Y) dropping by 1 basis point to 4.39%.
Market Challenges
Commenting on the current market dynamics, SocGen’s Kit Juckes painted a cautionary picture: “The big risks facing markets this year are bonds and a horrible surprise.” Juckes added, “There’s no doubt that other markets are marching to the bond piper’s tune, to a degree seldom seen in the past.”
“Bond markets may focus a little less on the start of the year’s supply deluge in coming days and weeks, and more on economic data. This week, the US calendar starts slowly with leading indicators today; a largely ignored series nowadays, but one warning of weakness ahead. The most-watched release will be the Q4 GDP report, where the consensus call is 2%.”
Economic Indicators
In the trading day ahead, the December index of leading economic indicators is anticipated to show a decline of 0.3%. This data, combined with other economic reports, will be of particular interest as the market continues its upward trajectory.