Futures are mixed as investors assess the prospect of higher interest rates

Traders on the NYSE floor

Source: NYSE

Futures were mixed early Friday morning as investors continued to assess earnings reports and harsher language from Federal Reserve speakers.

Futures contracts linked to the Dow Jones Industrial Average edged down 34 points, or 0.1%. S&P 500 futures traded nearly flat, while Nasdaq-100 futures rose 0.19%.

Thursday brought another day of declines for the major indices. The S&P 500 lost 0.31% and the Nasdaq Composite lost 0.35%.

Shares of Cisco rose during regular trading, jumping earnings results. Meanwhile, companies posting results after the closing bell, such as Gap, Ross Stores and Palo Alto Networks, added to the mix of companies beating expectations.

But investors also had to heed comments from more than half a dozen Fed speakers at events across the country. Notably, St. Louis Federal Reserve Chairman James Bullard said Thursday that “the policy rate is not yet in a zone that could be considered sufficiently tight.” He suggested that the appropriate zone for the federal funds rate could be between 5% and 7%, which is above what the market is pricing.

Yields, meanwhile, jumped in tandem, with the policy-sensitive 2-year Treasury yield hitting 4.45%. The move alarmed investors who fear that rising rates could trigger a recession.

Investors have reacted to every new economic data or language in recent weeks that might indicate what the Fed will do next with interest rates, said Shelby McFaddin, investment analyst at Motley Fool Asset Management. In this case, she said comments about inflation led investors to believe the Fed didn’t think the economy had cooled enough.

“There’s absolutely been a hunger for relief and a tussle,” she said of the investor response in recent days. “But at the end of the day, it really depends on whether this inflationary period turns into deflationary more slowly than it accelerated, and what the Fed decides to do next.”

Investors will be watching existing home sales data on Friday for any indication of a cooling economy. Boston Fed President Susan Collins will speak in the morning.


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