Stock futures rose on Monday but gains were limited by comments from Federal Reserve officials that tempered enthusiasm over just how soon interest rates might be lowered.
“The surge in risk appetite, fueled by the Fed’s recent stance, has paused as [S&P 500] bulls are likely catching their breath at the open,” SPI Asset Management said.
“Despite some pushback from Fed officials, interest rate futures markets are still currently pricing 150 basis points of rate cuts from the Federal Reserve next year. So, the recent decline in bond yields and the dollar is expected to underpin risk assets throughout the week,” it added.
Fundstrat said stocks will also be supported by the buying of fund managers who had been worried about the macroeconomic environment and therefore until recently had been overly defensive.
“As we think about the final two weeks of 2023, this tells me that there will be a certain amount of performance chasing into year end,” Fundstrat said.
“And couple that with the fact that retail investors withdrew $240 billion from ETF and mutual funds, in a year when S&P 500 [was up greater than] 25%, and one can see why equities have an underlying bid into year end.”