Opening Bell: Futures, Stocks Waver As Fed Minutes Fail To Ease Growth Worries

Key Events

Dow Jones, S&P 500, NASDAQ 100, and Russell 2000 futures fluctuated between gains and losses on Thursday, ahead of the New York session as yesterday's release of the minutes from the Federal Open Market Committee (FOMC) meeting earlier in May failed to calm market worries about the path for interest rate hikes going forward and the effect they might have on economic growth.

European stocks were slightly higher as rising oil prices persuaded traders on the continent to bid up energy stocks.

Global Financial Affairs

Although the minutes showed that all committee members were in agreement on a half-percentage-point rate increase, traders have some concerns that the planned rate hikes may not materialize as some Fed members have expressed worries that ongoing hikes will cause financial instability.

Just a week ago, Kansas City Fed President Esther George indicated the Fed is not considering the impact of rates on the stock market. Yesterday's minutes showed some FOMC members were concerned about Treasuries and commodities, but not about the stock market which some investors considered an unclear message.

In addition, a report that Apple (NASDAQ:AAPL), the maker of the ubiquitous iPhone, will maintain its current production levels for 2022 as demand cools for smartphones, may be further evidence of slowing consumer spending.

In Europe, the STOXX 600 Index climbed for the second day, boosted by energy companies.

The pan-European benchmark's current advance could be part of a Rising Flag, bearish after a drop. A downside breakout would slip further below the March trough, establishing a descending series of peaks and troughs, satisfying the conservative approach of a downtrend with highs and lows independent of the previous trend.

Earlier Thursday, Asian markets were mixed with the Shanghai Composite closing up 0.5% while Hong Kong's Hang Seng, Japan's Nikkei 225 and South Korea's KOSPI all closed in negative territory.

How has the Treasury market reacted to the minutes? Investors increased demand for the sovereign bonds, pushing yields on the 10-year Treasury to their lowest level since Apr. 13. Investors had been selling Treasuries between the Mar. 7 bottom and the May 6 high. The outlook for higher rates sent stocks spiraling.

Investors have returned to the bond market as stocks were being sold off, in search of a safe haven and as an inflation hedge; many think Fed policy could end up chasing inflation higher rather than getting ahead of it.

The dollar was flat to slightly lower.

The greenback fell back below the neckline of a massive range in play since 2016. Will the USD now fall back toward its bottom or will it find support by the trendline and repeat the double-digit percentage of the range's topside? That probably depends on the Fed.

Gold was marginally lower, down for the second week in a mirror image of the dollar's rise. The following chart shows investor indecision between focusing on inflation, which boosts the price of the precious metal, or rates, which should dent it.

The yellow metal is trading within an overall symmetrical triangle—illustrating the epitome of indecision—though the majority of the interest appears within a rising channel. However, if the dollar does accumulate at the top of its range, gold will likely fall below its March lows.

Bitcoin declined for a second day.

Although the cryptocurrency remained within the same congestion, it is at a critical level which will determine if the price will fall much lower.

Oil edged up for the second day.

Up Ahead

• The US PCE price index is printed on Friday.
• On Friday, US personal income and spending figures are released.
• University of Michigan consumer sentiment is published on Friday.

Market Moves

Stocks

• The MSCI Asia Pacific Index was little changed
• The MSCI Emerging Markets Index rose 0.3%

Currencies

• The euro was up 0.4% at $1.0720
• The Japanese yen fell 0.5% to 126.72 per dollar
• The offshore yuan rose 0.5% to 6.7471 per dollar
• The British pound rose 0.4% to $1.2617

Bonds

• Germany's 10-year yield rose to 0.976%
• Britain's 10-year yield rose to 1.94%

Commodities

• Brent crude rose 0.6% to $111.81 a barrel
• Spot gold fell 0.5% to $1,845.06 an ounce