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Will Thursday be another day to pose with the bulls?

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U.S. stock futures traded modestly lower on Thursday after the European Central Bank raised interest rates by 75 basis points, and investors waited to hear from Federal Reserve Chairman Jerome Powell.

Powell is set to take part in a discussion on monetary policy hosted by the Cato Institute in Washington. It’s slated to start at 9:10 Eastern Time, just before the U.S. stock market opens.

How are stock-index futures trading
  • S&P 500 futures ES00, -0.22% dipped 8 points, or 0.1%, to 3972.
  • Dow Jones Industrial Average futures YM00, -0.09% fell 27 points, or 0.1%, to 31548.
  • Nasdaq 100 futures NQ00, -0.43% eased 40 points, or 0.3%, to 12222.

U.S. stocks snapped a lengthy losing streak on Wednesday, with the Dow Jones Industrial Average DJIA, +1.40% rising 436 points, or 1.4%, to 31581, the S&P 500 SPX, +1.83% advancing 72 points, or 1.83%, to 3980, and the Nasdaq Composite COMP, +2.14% gaining 247 points, or 2.14%, to 11792. For the Nasdaq, the 7-day losing streak was its longest since 2016.

What’s driving markets

Wall Street was striving to record a second consecutive day of gains Thursday as bulls held their ground despite more warnings that the Federal Reserve would maintain its aggressive monetary policy stance on defeating inflation.

Any comments by Powell on the Fed’s strategy are expected to match the hawkish tone adopted the previous day by Vice-Chair Lael Brainard, who warned higher interest rates that cool the economy would be necessary “for some time.”

Worries about rampant inflation, the higher borrowing costs needed to suppress it and the consequently strong dollar have been roiling stock markets of late.

But the S&P 500 index was able to absorb the Brainard comments and rally 1.8% on Wednesday, recovering off an eight-week low around the 3,900 level as traders pointed to technical factors supporting the bounce.

In particular, the 14-day relative strength index for S&P 500 futures had fallen into oversold territory below 30, according to CMC Markets. It was only three weeks ago that the closely watched momentum gauge was over 70 and signaling the stock benchmark was overbought.

“Markets are short-term oversold but everyone knows it. A short-term rally here shouldn’t be surprising, but the lack of one would be both surprising and concerning for the medium-term,” said Jonathan Krinsky, chief market technician at BTIG.

The mood has also been improved by benchmark bond yields pulling back from recent highs as oil prices this week fell to their cheapest since before Russia invaded Ukraine in February, with Brent crude BRN00, +0.69% below $90 a barrel.

“There may be fresh storms brewing for the global economy but inflation is the tornado to tame and the drop in crude prices has lifted hopes in the U.S. at least that the price spiral may be easier to control,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

A further boost to sentiment came as the dollar index DXY, -0.28% , which midweek looked to challenge 111.0 for the first time in 20 years, showed some signs of running out of steam.

The reason for the latter is that the euro EURUSD, -0.13% softened slightly after the European Central Bank lifted its key interest rates by 75 basis points and said more hikes were likely to come in response to inflation that remains “far too high” and “likely to stay above target for an extended period.” 

The pound GBPUSD, -0.26% also declined against the dollar following the ECB hike and U.K. Prime Minister Liz Truss unveiling details of a £150 billion ($173 billion) support package for households and business struggling with surging power prices.

On the U.S. economic data front, weekly jobless claims data showed layoffs in the U.S. remained near record lows as the number of Americans applying for unemployment benefits fell to its lowest level in three-and-a-half months.