Stock futures up as investors avoid faster Fed hikes

U.S. stock futures went up on Monday as investors shied away from the possibility of a faster Fed tightening amid hopes that the U.S. economy remains healthy.

The Dow Jones Industrial Average DJIA went up 77 points, or 0.23%, to 32803, the S&P 500 SPX declined 7 points, or 0.16%, to 4145, and the Nasdaq Composite COMP fell 63 points, or 0.5%, to 12658, or 77 points, on Friday. The S&P 500 is up for three consecutive weeks but is down 13% for the year to date.

The equity index futures point to Wall Street challenging its highest level in more than two months. Since hitting its 2022 low in June, the S&P 500 has gone up 13% after investors bet that pessimism over corporate prospects was overdone in the wake of surging inflation and tighter central bank monetary policy.

Stocks sold off on Friday after a stronger than expected U.S. jobs report for July when investors worried that the data gave the Federal ReserveFederal Reserve more time to slow down the pace of interest rate hikes in order to dampen inflation.

Risk appetite has returned, with traders hoping that a robust labor market challenges recent evidence of a slowing U.S. economy and a generally well-received second-quarter company earnings season comes to a close. The U.S. Senate approved Democrat's big healthcare, climate and tax package over the weekend.

Friday s payrolls put the shoe on the other foot, as it was too easy to mock efforts to downplay the first half of the recession, said analysts at Jefferies in a weekend note.

The U.S. workforce is now larger than it was in February 20. The current economy's strength was never seen in the face of negative GDP, and it just got a little bit absurd. The fact that the SPX bounced off Friday's low to not kill off the torrid run we've observed since mid-July makes sense, according to the Jefferies analysts.

The market rally is facing technical challenges, according to some observers. The S&P 500 surge of late has left its 14 day relative strength index, a closely watched momentum gauge, at 71.6 and in overbought territory.

The benchmark index is looking at resistance at the 4,200 level, and if that is breached then the 200 day moving average looms into view.

The possibility of lower lows is opened because of economic and policy uncertainty, which leads to continued trade in the S&P 500 below 4,200 and 4,340, according to analysts at Evercore ISI.

The US 10 year Treasury yield TMUBMUSD 10 Y, which had jumped on Friday after the jobs data, has easing 3 basis points to 2.802%, as a calmer tone in sovereign bonds.

There is a slide in energy costs that should help in reducing inflation in the coming months, which is also a factor in the market's risk appetite on Monday. Since Russia sacked Ukraine in February, the price of 1, was down 0.2% to $89.40 a barrel.

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