Futures trade mixed as investors weigh the prospect of higher interest rates

Traders on the floor of the NYSE

Source: NYSE

Futures were mixed early Friday morning as investors continued to evaluate earnings reports and tougher language from Federal Reserve speakers.

Futures tied to the Dow Jones Industrial Average were down 34 points, or 0.1[ads1]%. S&P 500 futures traded almost flat, while Nasdaq 100 futures rose 0.19%.

Thursday brought another day of falls for the major indexes. The S&P 500 fell 0.31%, and the Nasdaq Composite lost 0.35%.

Cisco stock rose in regular trading, bouncing off the earnings results. Meanwhile, companies posting results after the closing bell, such as Gap, Ross Stores and Palo Alto Networks, added to the mix of companies beating expectations.

But investors also had to consider comments from more than half a dozen Fed speakers at events across the country. In particular, St. Louis Federal Reserve President James Bullard said Thursday that “the policy rate is not yet in a zone that can be considered sufficiently restrictive.” He suggested that the appropriate zone for the federal funds rate may be in the range of 5% to 7%, which is higher than what the market is pricing.

Interest rates, meanwhile, jumped in step, with the policy-sensitive 2-year Treasury yield rising to 4.45%. The move spooked investors who worry that rising interest rates could trigger a recession.

Investors have responded to every new piece of economic data or any language in recent weeks that might indicate what the Fed will do next with interest rates, said Shelby McFaddin, investment analyst at Motley Fool Asset Management. In this case, she said the comments about inflation led investors to believe the Fed doesn’t think the economy has cooled enough.

“There has certainly been a thirst for relief and a tug of war,” she said of the investor response in recent days. “But at the end of the day, it really just depends on this period of inflation being deflationary slower than the one that increased, and what the Fed decides to do next.”

Investors will watch Friday for data on existing home sales for any indication of a cooling economy. Boston Fed President Susan Collins will speak in the morning.

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