Stock Market Today: Dow Gains; Treasuries Rally; Workday, Las Vegas Sands, and More Movers; Bitcoin; and More - Barron's

U.S. stock futures rose Wednesday after comments from a Federal Reserve official fueled optimism that interest rates could be lowered sooner than expected. More Fed speakers an economic data could advance the narrative in the day ahead.

Futures for the Dow Jones Industrial Average gained 120 points, or 0.3%, after the index climbed 83 points on Tuesday to finish at 35,416. S&P 500 futures were up 0.5% with contracts tracking the tech-heavy Nasdaq Composite rising 0.7%.

The narrative that waning inflation will allow the Fed to cut interest rates next year continues to dominate, with momentum continuing for stocks following remarks from a governor at the central bank. Christopher Waller, who typically strikes a more aggressive tone on monetary policy, said Tuesday that he was “increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%,” which is the Fed’s target.

“Comments from a usually hawkish Fed policymaker that there could be room for cuts to interest rates if the price spiral keeps heading in the right direction look set to push Wall Street higher at the open,” said Susannah Streeter, an analyst at broker Hargreaves Lansdown.

Indeed, Waller’s words have pushed bond yields lower, further supporting stocks, as traders have moved to price in a fall in borrowing costs sooner rather than later. The odds that rates come down by the Fed’s policy meeting in March rose to 43% on Wednesday, up from below 35% on Tuesday, according to the CME FedWatch Tool. The odds of a rate cut by May now sits around 75%, also up from a day ago.

“Investors may be thinking that if a well-known hawk is now considering rate reductions, some other members may be keener to push the cut button at some point during the first half of the year,” said Charalampos Pissouros, an analyst at broker XM.

The day ahead could see catalysts that may advance—or disrupt—this narrative, with economic indicators shining a fresh light on the growth picture in the U.S. and another spate of central bank speakers.

The Fed’s “Beige Book,” which is a periodic review of anecdotal economic conditions, is due, as is a second estimate of third-quarter U.S. gross domestic product. The GDP reading will also include preliminary quarter-over-quarter core personal-consumption expenditures (PCE) data, which is the Fed’s preferred measure of inflation. A full reading of core PCE for October is due Thursday.

Thomas Barkin and Loretta Mester, the presidents of the Richmond and Cleveland Feds, respectively, will deliver remarks. Investors will want to see signs that economic growth remains in a sweet spot—not too hot as to prompt the Fed to keep rates high, but not so weak as to stoke recession concerns—and more dovish words from central bank officials.

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