Wall Street’s main indexes were set to open higher on Friday, as investors looked past hawkish comments from a top Federal Reserve official that had fanned fears of aggressive interest rate hikes from the central bank.
St. Louis Fed President James Bullard said on Thursday the U.S. central bank needed to keep raising interest rates given that its tightening so far “had only limited effects on observed inflation”.
The comments, coming on the heels of strong retail sales data, dampened hopes of the Fed toning down its hawkish approach following softer-than-expected inflation reports.
“Initially when that (Bullard commentary) came out, you saw the market sell off and then there was some discussion about was he being over-reactive?” said Kenny Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.
All the three major U.S. indexes, which fell for a second straight session on Thursday, appear set to log weekly declines after notching solid gains last week.
“The rate increases that we’ve had over the last six months haven’t really had time to completely filter through the system and we’re going to see more of it filter over the next couple of months,” Polcari said.
Traders still largely expect the central bank to hike interest rates by 50 basis points in December and see rates peaking at 5.02% in May next year. .
“Markets are getting a little bit more comfortable with the fact that (a Fed pivot) is not likely. They are getting more comfortable with a generally higher interest rate regime,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
The benchmark S&P 500 (.SPX) and the Nasdaq (.IXIC) have lost 17% and nearly 29%, respectively, so far this year on worries that the Fed’s aggressive rate hikes aimed at curbing inflation could push the economy into a recession.
At 8:31 a.m. ET, Dow e-minis were up 224 points, or 0.67%, S&P 500 e-minis were up 35.5 points, or 0.9%, and Nasdaq 100 e-minis were up 118.25 points, or 1.01%.
U.S.-listed shares of JD.com Inc advanced 2.7% after the e-commerce firm posted better-than-expected third-quarter revenue, as COVID-19 lockdowns in China led more consumers to shop online.