S&P 500 Futures Surge: TSMC’s Results and Treasury Yields Play Key Roles

Thursday witnessed a marginal uptick in U.S. stock index futures as Asian market concerns eased, accompanied by a dip in Treasury yields.

Current Futures Activity:

• S&P 500 futures (ES00, +0.38%) increased by 4 points or 0.1%, reaching 4775.
• Dow Jones Industrial Average futures (YM00, -0.07%) saw a slight decrease of 20 points, less than 0.1%, settling at 37438.
• Nasdaq-100 futures (NQ00, +0.79%) posted a gain of 48 points, equivalent to 0.3%, reaching 16918.

On the prior day, the Dow Jones Industrial Average (DJIA) declined by 94 points or 0.25% to 37267. The S&P 500 (SPX) witnessed a 27-point drop or 0.56% to 4739, while the Nasdaq Composite (COMP) slipped by 89 points or 0.59% to 14856.

Market Influences:

Market movements continue to be influenced by bond market dynamics. The positive aspect for equity enthusiasts is the gradual decline in Treasury yields, providing a stabilizing effect on index futures.

The S&P 500 has faced volatility at the beginning of the year, stepping back from recent highs as investors adjusted their expectations concerning potential interest rate cuts. This adjustment has led to increased implied borrowing costs.

The 10-year Treasury yield (BX:TMUBMUSD10Y) rose over 30 basis points from its December 27 low of 3.8% by midweek. This rise was fueled by central bank officials pushing back against rate-cut expectations and a surge in response to robust U.S. retail sales data.

The noteworthy tight correlation between bond and equity markets in 2024 may not persist indefinitely, according to historical patterns. Presently, both markets experienced a sell-off as investors scaled back expectations for imminent rate cuts.

Traders are adjusting their expectations for a 25 basis point rate cut by the Federal Reserve at its March meeting, with the probability decreasing from 73.3% a week ago to 63%.

U.S. futures found support from the improved performance of Asian markets. Hong Kong’s Hang Seng (HSI) rebounded by 0.75%, recovering from a 3.7% plunge on Wednesday. The Shanghai Composite (SHCOMP) also regained stability with a 0.4% gain.

Taiwan Semiconductor Manufacturing Company (2330, +1.20%) exceeded analyst forecasts, potentially providing support to the Nasdaq Composite index in the U.S.

The ongoing mixed earnings season includes reports from Fastenal (FAST, -0.61%), First Horizon (FHN, -0.23%), and KeyCorp (KEY, -0.57%) before the opening bell. After the close, PPG Industries (PPG, -0.47%), J.B. Hunt Transport Services (JBHT, +0.40%), and First National Bank (FNB, -0.61%) are set to report.

Scheduled U.S. economic updates for Thursday include weekly initial jobless claims, the January Philadelphia Fed manufacturing survey, and December housing starts and building permits, all at 8:30 a.m. Eastern.

Atlanta Fed President Raphael Bostic is slated to speak on the economic outlook at 7:30 a.m. and again at 11:30 a.m.