S&P 500 Futures Approach 2023 Highs as Last Full Week Unfolds

On Monday, U.S. stock futures flirted with reaching their peak for the year, buoyed by benchmark borrowing costs lingering near their summer lows.

Here’s a snapshot of how stock-index futures are performing:

• S&P 500 futures (ES00, +0.15%) increased by 10 points, or 0.2%, to 4778.
• Dow Jones Industrial Average futures (YM00, +0.15%) gained 49 points, or 0.1%, reaching 37710.
• Nasdaq-100 futures (NQ00, +0.01%) added 25 points, or 0.1%, reaching 16845.

In the previous session, the Dow Jones Industrial Average rose by 57 points, or 0.15%, to 37305, the S&P 500 remained unchanged at 4719, and the Nasdaq Composite gained 52 points, or 0.35%, reaching 14814.

Driving market trends:

Stock-index futures are displaying modest strength as the final full trading week of the year commences, with the S&P 500 hovering near its highest level in nearly two years and within 2% of its record high.

The equity benchmark has sustained a seven-week winning streak, marking its most robust run in six years, with a 14.6% gain amid optimism that the Federal Reserve will initiate interest rate cuts next year.

The 10-year Treasury yield (BX:TMUBMUSD10Y), which surpassed 5% in October, is presently around 3.9%, reflecting a recent decline following the Fed’s indication of a more dovish monetary policy last week.

However, early Monday trading in stock futures and bonds demonstrated less enthusiasm following recent statements from Fed officials, including New York Federal Reserve Bank President John Williams and Chicago Fed President Austan Goolsbee, tempering expectations of imminent rate cuts.

Stephen Innes, managing partner at SPI Asset Management, remarked, “The surge in risk appetite, fueled by the U.S. Federal Reserve’s recent stance, has paused as [S&P 500] bulls are likely catching their breath at the open.”

Innes added, “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.”

Remaining optimistic, Tom Lee, head of research at Fundstrat, anticipates support for stocks from fund managers who, until recently, had defensively positioned themselves due to macroeconomic concerns. Lee foresees performance chasing into year-end, coupled with retail investors withdrawing $240 billion from ETF and mutual funds, contributing to the underlying demand for equities.

Economic updates expected on Monday include the release of the homebuilder confidence index for December at 10 a.m. Eastern.