Stock Market Volatility Anticipated Before Economic Reports

U.S. stock futures were mixed on Thursday as investors weighed concerns about slowing global growth and high interest rates against hopes for China’s reopening this year.

Futures prices fluctuated between small losses and gains. As of late morning in London, futures tied to the S&P 500 had risen by 0.1% while Dow Jones Industrial Average futures and Nasdaq-100 futures were roughly flat, up by 0.2% respectively.

U.S. indexes gained on Wednesday, despite the release of Federal Reserve meeting minutes in which officials stressed their resolve to tame inflation.

After trending lower in recent days, yields on U.S. Treasury bonds inched up. The yield on the benchmark 10-year Treasury note rose to 3.713% from 3.709% on Wednesday. Bond yields and prices have an inverse relationship - when yields rise, prices fall.

The dollar remained relatively stable, with the WSJ Dollar Index, which tracks the dollar against a selection of other currencies, decreasing by less than 0.1%.

Investors are concerned that central banks may not be able to control inflation without harming the global economy. Both inflation and economic growth have slowed, leading some to hope that the Fed and other central banks will soon reduce or end their programs of increasing interest rates. However, Fed officials cautioned investors in Wednesday's minutes that rates will need to stay high for a while longer.

Charles Diebel, head of fixed income at Mediolanum International Funds, believes that unless there is a shock from leftfield, growth will continue to be soft, inflation will decline, and central banks will eventually stop raising interest rates. According to Diebel, this year is all about when, not if.

Investors will be closely watching economic data releases on Thursday for clues on how the economy is faring in the face of rising interest rates. The weekly jobless claims report and ADP's employment report will be closely watched for signs of strength or weakness in the labor market. The monthly jobs report, due out Friday, will also be closely watched for clues on the health of the economy.

One of the biggest unknowns for markets in 2023 is how China's reopening from Covid-19 lockdowns will proceed. Investors are hoping that Beijing will be able to return its economy to full steam without sparking a dangerous new virus wave. However, it is unclear whether the reopening would reduce inflation as logistical bottlenecks ease or propel it higher as Chinese consumers spend more, said Mr. Diebel.

"China's reopening is the most obvious curveball for investors at the moment," Mr. Diebel added.

After falling sharply in the first few trading days of 2023, oil prices rebounded. The most actively traded Brent crude futures contract rallied 2.2% to $79.53 a barrel. Brent had fallen more than 9% over the previous two days, on concerns about global demand.

Amazon.com stock rose 2.8% in premarket trading, after The Wall Street Journal reported the company would lay off more than 18,000 employees—a larger total than originally expected. This is the latest sign that tech firms are concerned about an economic downturn.

European indexes were mixed on Thursday, with the Stoxx Europe 600 wavering between small gains and losses. Investors were digesting the minutes from the Federal Reserve's latest meeting, which were released after European markets closed on Wednesday. In the end, the Stoxx Europe 600 edged down less than 0.1%.Asian markets mostly rose on Wednesday. The Nikkei 225 gained 0.4% while the Hang Seng Index in Hong Kong and mainland China’s Shanghai Composite Index both rose by 1%.