U.S. Stock Futures Steady After Nasdaq Hits Record on Lower Fed Hike Bets
U.S. stock futures were little changed on Monday evening after the Nasdaq Composite closed at a record high, as investors continued to scale back expectations for another Federal Reserve interest-rate hike this month. The market is now shifting its attention from monetary policy toward the upcoming third-quarter earnings season, while elevated Treasury yields remain a key risk for stocks.
Nasdaq-100 futures were up about 0.2%, while S&P 500 futures gained roughly 0.1% in Monday evening trading. Dow futures were also little changed. The muted futures action suggests investors are taking a pause after a strong technology-led session rather than immediately extending the rally.
The setup is important for Indian investors because movements in U.S. technology stocks, Treasury yields and Federal Reserve expectations can influence global risk appetite, the dollar, emerging-market flows and Indian equities.
Nasdaq Closes at a Record as Tech Stocks Lead
The Nasdaq Composite rose about 1.1% to 27,477.31 on Monday, reaching a fresh record high. The S&P 500 gained approximately 0.7% to 7,773.95, while the Dow Jones Industrial Average added 0.18%.
Technology and AI-related stocks were among the strongest performers.
Nvidia gained 2.1%, taking its market value to roughly $5.76 trillion. Microsoft, Meta Platforms and Tesla also advanced, helping lift the technology-heavy Nasdaq.
The move shows that investors remain willing to pay premium valuations for companies expected to benefit from artificial intelligence and related infrastructure spending.
However, the rally is taking place alongside unusually high bond yields, creating an important tension for the market.
Why Fed Rate-Hike Bets Have Fallen
The biggest immediate support for U.S. stocks has been a change in expectations for Federal Reserve policy.
Recent U.S. employment data showed that job growth slowed more sharply than expected in September, while previous payroll figures were revised lower. That reduced expectations for another Fed rate increase at its October meeting.
Reuters reported that the probability of an October hike had fallen to roughly 24% from 64% a week earlier, according to CME FedWatch data.
In simple terms, investors are increasingly betting that the Fed will hold rates steady rather than raise them again in October.
That matters for equities because higher interest rates generally make borrowing more expensive and can reduce the present value of future corporate earnings. Growth stocks, particularly technology companies, tend to be especially sensitive to changes in interest-rate expectations.
The decline in hike expectations has therefore provided some relief to technology valuations.
But the Bond Market Is Sending a Different Signal
The stock market's optimism is not being fully confirmed by the bond market.
The U.S. 10-year Treasury yield climbed to around 5.31% on Monday, according to Reuters. Longer-term Treasury yields remain near their highest levels in decades.
That creates a difficult backdrop for equities.
Lower expectations for an immediate Fed hike are supportive for stocks, but persistently high long-term yields can still pressure valuations. Higher yields also provide investors with a more attractive alternative to riskier assets.
The market is therefore dealing with two competing forces:
Lower near-term Fed hike expectations support stocks.
High long-term Treasury yields put pressure on valuations.
Strong AI investment and earnings expectations support technology shares.
Inflation and energy costs could force interest rates to remain elevated for longer.
For now, investors appear to be giving greater weight to the first and third factors.
Oil Prices Are Providing Another Tailwind
Falling oil prices have also helped sentiment.
Brent crude settled around $100.32 a barrel on Monday, down 1.89%, while U.S. West Texas Intermediate crude fell 1.84% to about $89.43. Increased Middle East exports and a Group of Seven commitment to boost supplies contributed to the decline.
Lower oil prices can reduce concerns about another wave of inflation.
That is particularly important for the Federal Reserve. If energy costs remain elevated, inflation could become more persistent and make it harder for the central bank to ease monetary policy.
The recent decline in crude therefore gives equity investors another reason to remain optimistic.
But the situation remains fluid because geopolitical disruptions continue to threaten energy supplies.
The Inflation Problem Has Not Disappeared
Despite the improvement in Fed hike expectations, investors should not assume the inflation issue is over.
The latest ISM services report showed that U.S. services activity slowed modestly in September, with the services PMI falling to 54.9 from 55.4. A reading above 50 still indicates expansion.
More importantly, the survey's prices-paid index jumped to 74.0 from 72.6, its highest level since July 2022. Supply-chain pressures and higher fuel and commodity costs were among the factors contributing to the increase.
This creates a potentially uncomfortable combination: economic growth remains solid, but inflationary pressures are building.
The U.S. services sector accounts for more than two-thirds of economic activity, so persistent price pressures could keep the Fed cautious even if the labor market weakens.
Earnings Season Becomes the Next Major Catalyst
With the Federal Reserve temporarily moving into the background, investors are turning toward corporate earnings.
The market has already priced in considerable optimism around artificial intelligence, semiconductor demand and technology spending. That means companies may need to deliver strong results and guidance to justify current valuations.
This is particularly important for mega-cap technology companies.
If earnings and AI-related capital expenditure remain strong, the Nasdaq could continue benefiting even with elevated Treasury yields. On the other hand, disappointing guidance could trigger profit-taking because valuations are already high.
For investors, the distinction between good earnings and earnings that are good enough to justify the current share price is becoming increasingly important.
Why This Matters for Indian Investors
U.S. market movements often influence Indian equities through global fund flows, technology-sector sentiment and currency movements.
A sustained Nasdaq rally can support sentiment toward Indian IT and technology stocks, particularly when the rally is driven by expectations of stronger global technology spending.
However, elevated U.S. Treasury yields remain a risk for emerging markets. Higher U.S. yields can make dollar assets relatively more attractive and potentially increase pressure on emerging-market currencies and foreign portfolio flows.
Indian investors should therefore watch both Wall Street equities and the U.S. bond market rather than focusing only on the Nasdaq.
What Investors Should Watch Next
Several developments could determine whether the current U.S. stock-market strength continues:
Fed minutes: Investors will look for clues about how policymakers view inflation, employment and the possibility of another rate hike.
Treasury yields: A further rise in the 10-year yield could challenge technology-stock valuations even if the Fed holds rates steady.
Corporate earnings: Third-quarter results and guidance will test whether AI-driven optimism is translating into actual earnings growth.
Oil prices: A sustained decline could reduce inflation pressure, while another sharp increase could revive rate-hike concerns.
Labor-market data: Further weakness in employment could reinforce expectations for no October hike, but excessive weakness could raise concerns about economic growth.
Bottom Line
U.S. stock futures are steady after the Nasdaq reached a record high, with reduced expectations for an October Federal Reserve rate hike providing support to technology stocks. Nvidia and other mega-cap technology companies led Monday's rally, while lower oil prices added to investor optimism.
The bigger market question is whether falling Fed hike expectations can outweigh the pressure created by elevated Treasury yields and renewed inflation concerns. For now, investors are leaning toward the positive scenario, but the upcoming earnings season could provide a much tougher test.
For Indian investors, the key signals to watch are the Nasdaq, U.S. 10-year Treasury yield, oil prices, Fed commentary and technology earnings. Together, they will help determine whether the current risk-on mood can continue.
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This article is for informational and educational purposes only and should not be considered investment advice.