# Wall Street seen opening higher but U.S. recession priced in Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-11-18 Category: INVESTING Category URL: https://financedigest.com/category/investing Meta Title: U.S. Stock Futures Gain Despite Fed Warning Meta Description: Stay informed on the latest developments in Wall Street as U.S. stock index futures indicate a higher open, despite Fed officials' warnings on interest URL: https://financedigest.com/wall-street-seen-opening-higher-but-u-s-recession-priced-inhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-11-18t020932z1lynxmpeiah020rtroptp4global-markets-1736814845747-compressed.jpg) By Carolyn Cohn LONDON (Reuters) – U.S. stock index futures rose on Friday, indicating a higher open on [Wall Street](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May"), as investors digest warnings from U.S. Federal Reserve officials on U.S. [interest rates](https://www.financedigest.com/ecb-raises-interest-rates-again-cuts-bank-subsidies.html "ECB raises interest rates again, cuts bank subsidies"), but the U.S. [bond yield](https://www.financedigest.com/wall-st-stocks-fall-bond-yields-rise-as-china-drops-quarantine-rule.html "Wall St stocks fall, bond yields rise as China drops quarantine rule") curve remains priced for a recession. S&P futures gained 0.8%, recovering poise after the S&P 500 index dipped 0.3% and U.S. [bond yields](https://www.financedigest.com/euro-zone-bond-yields-rise-after-u-s-jobs-data.html "Euro zone bond yields rise after U.S. jobs data") rose on Thursday following comments from St. Louis Fed President James Bullard. Bullard said interest rates might need to [hit a range from 5-5.25% from the current level of just below 4.00% to be “sufficiently restrictive” to curb inflation](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc.html "UK shop price inflation hits record 8% in January: BRC"). That was a blow to investors who had been wagering rates would peak at 5% and saw Fed fund futures [sell off as markets priced](https://www.financedigest.com/3-tricks-to-get-a-better-price-when-selling-your-car.html "3 Tricks To Get a Better Price When Selling Your Car") in more chance that rates would now top out at 5-5.25%, rather than 4.75-5.0%. The [Fed has come back through their speeches and pushed back against the market](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi") narrative – we are not going to see a pivot,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management. Sai said markets were currently “running on fumes” and would likely switch focus to the real economy’s response to rising rates, such as anecdotal [signs of slowdown](https://www.financedigest.com/adecco-sees-signs-of-a-hiring-slowdown-at-start-of-2023.html "Adecco sees signs of a hiring slowdown at start of 2023") in the U.S. labour market. GRAPHIC: Implied Fed [terminal rate](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") – https://fingfx.thomsonreuters.com/gfx/mkt/akveqzmxrvr/One.PNG ![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/11/558.jpg) The MSCI world equities index rose 0.33% but was [heading for a 0.5% loss](https://www.financedigest.com/uk-motor-and-home-insurers-headed-for-heavy-losses-ey-warns.html "UK motor and home insurers headed for heavy losses, EY warns") on the week, coming off recent two-month highs. Inflows into global [equity funds](https://www.financedigest.com/norway-wealth-fund-to-consider-investing-in-unlisted-equities.html "Norway wealth fund to consider investing in unlisted equities") hit their highest level in 35 weeks in the week to Wednesday, according to a report from Bank of America (BofA), as investor optimism brightened. Euro zone banks, meanwhile, are set to repay 296 billion euros in multi-year loans from the European Central Bank next week, the ECB said on Friday, in its latest step to fight runaway [inflation in the euro](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data") zone. This is less than the half a trillion euros that analysts were expecting but still the biggest [drop in excess liquidity since records](https://www.financedigest.com/bentley-cruises-to-record-sales-in-2022-despite-china-drop.html "Bentley cruises to record sales in 2022 despite China drop") began in 2000. The yield on Germany’s 10-year government bond, the benchmark for the [euro zone](https://www.financedigest.com/euro-zone-inflation-seen-just-above-ecbs-target-in-2025-poll-shows.html "Euro zone inflation seen just above ECB’s target in 2025, poll shows"), was up 3.6 basis points at 2.06%. European [stocks gained](https://www.financedigest.com/stocks-dollar-gain-on-resilient-u-s-economy.html "Stocks, dollar gain on resilient U.S. economy") 1.2%, with banks up 1.4%. The European Central [Bank may need to raise interest rates so much that they dampen growth as it fights sky-high inflation](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel"), while any runoff in the ECB’s bond holdings must be “measured and predictable”, its chief Christine Lagarde said earlier on Friday. The ECB will be wanting to show that it’s a strong institution and that it’s willing to [fight inflation,”](https://www.financedigest.com/inflation-fighting-central-bankers-air-climate-role-doubts.html "Inflation fighting central bankers air climate role doubts") Jim Leaviss, Chief Investment Officer, Public Fixed Income at M&G Investments told the Reuters Global Markets Forum. There will come a time during 2023 where [rates will come down from the ECB](https://www.financedigest.com/stocks-euro-gain-amid-divergent-fed-ecb-rate-hike-outlooks.html "Stocks, euro gain amid divergent Fed, ECB rate hike outlooks") because the recessionary impulse will be quite severe. Britain’s FTSE rose 1% to two-month highs, a day after finance [minister Jeremy Hunt announced tax rises and spending cuts in an effort to reassure markets that the government was serious about fighting inflation](https://www.financedigest.com/german-inflation-rate-to-ease-over-course-of-2023-econ-minister.html "German inflation rate to ease over course of 2023 – econ minister"). U.S. two-year yields rose 3.8 bps to 4.49%, retracing a little of last week’s sharp inflation-driven drop of 33 basis [points to a low](https://www.financedigest.com/low-use-of-shortened-work-hours-points-to-mild-german-recession-ifo.html "Low use of shortened work hours points to mild German recession – Ifo") of 4.29%. That left them 69 basis points above 10-year yields, the [largest inversion since](https://www.financedigest.com/first-quarter-dash-for-cash-largest-since-early-2020-bofa.html "First quarter ‘dash for cash’ largest since early 2020 -BofA") 1981 and an indicator of impending recession. \[US/\] The [dollar fell 0.2% to 106.5 on a basket of currencies](https://www.financedigest.com/u-s-dollar-advances-vs-major-currencies-as-risk-appetite-fades.html "U.S. dollar advances vs major currencies as risk appetite fades"), after touching a three-month trough of 105.30 early in the week. The U.S. currency dropped 0.26% to 139.82 yen