Stock futures inch higher after Powell propels rally

US stock futures gained modestly Thursday as December trading commenced with a tailwind from Fed Chair Jerome Powell’s indication of a slowdown in the pace and magnitude of rate increases as soon as this month.

Futures tied to the S&P 500 (^GSPC) and technology-heavy Nasdaq Composite (^IXIC) were up about 0.2%, while those on the Dow Jones Industrial Average traded just above breakeven. In other pockets of the market, the US dollar index retreated to a three-month low, and US Treasury yields held steady after sharp declines.

Filings for unemployment insurance fell last week, holding near historic lows. Initial jobless claims, the most timely snapshot of the labor market, came in at 225,000 for the week ending Nov. 26, a decrease of 16,000 from the previous week’s revised level, Labor Department figures showed Thursday.

The moves Thursday follow bursts across the major averages in the previous session on the heels of a speech by Powell in Washington, DC, in which he signaled US central bank officials may downshift the final interest rate hike of the year later this month to 50 basis. points. Wednesday saw the S&P 500 bounce 3.1%, the Dow rise 2%, or more than 700 points — and exit a bear market — and the Nasdaq surge 4.4%.

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said, speaking at the Brookings Institution, as he acknowledged the “uncertain lags” of monetary tightening. “The time for moderating the pace of the rate increases may come as soon as the December meeting.”

Powell’s comments are likely the last public remarks he’ll deliver before Federal Reserve officials enter a blackout period — a time policymakers limit public speaking prior to a policy-setting meeting — ahead of their next gathering Dec. 13-14.

“The focus now should not be on the pace, but how much higher rates will need to go and how long they will need to stay there,” Jason England, global bonds portfolio manager at Janus Henderson Investors said in a note. “As the Fed will need to see ‘substantially more evidence’ that inflation is easing before they pause and Powell ended his speech by saying ‘history cautions strongly against prematurely loosening policy,’ pricing in cuts is premature.”

WASHINGTON, DC – NOVEMBER 30: Chair of the US Federal Reserve Jerome Powell speaks at the Brookings Institution, November 30, 2022 in Washington, DC. Powell discussed the economic outlook, inflation and the labor market. (Photo by Drew Angerer/Getty Images)

Sentiment got a boost Thursday from easing concerns over China’s zero-COVID unrest after top government official Vice Premier Sun Chunlan urged an “optimization” of the nation’s virus response as pathogenicity weakens.

Meanwhile on the corporate side, all eyes were on Salesforce (CRM) following news Co-Chief Executive Officer Bret Taylor would step down in January and co-founder Marc Benioff will become the sole CEO. Shares fell more than 7% pre-market.

Snowflake (SNOW) shares also dropped in extended trading after the company’s fourth-quarter product revenue forecast missed estimates on an expected slowdown in tech spending. The stock was down about 4% ahead of the open.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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