Stock Market Today: Stocks ride Treasury rally amid Fed rate cut forecasts

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U.S. equity futures bounced higher Friday as an extended pullback in Treasury bond yields put the major indices on pace for their third consecutive weekly gain and the longest winning streak since July.

Updated 8:35 AM EST - Martin Baccardax

Housing Starts notch modest rebound as mortgage rates retreat

October housing starts nudged 1.9% higher last month, the Commerce Department reported Friday, to an annualized rate of 1.372 million units, firmly ahead of the Street's 1.35 million forecast.

Permits for new construction, a key indicator of demand, were up 1.1% to 1.487 million units, following last week's big decline in 30-year fixed mortgage rates, which were last pegged at 7.61%.

Updated 8:00 AM EST - Martin Baccardax

Cash on the sidelines

This year's surge in fixed income yields, which have six-month Treasury bills trading at 5.445% in early Friday dealing, have attracted record flows into money market funds, according to data from the Investment Company Institute.
ICI says money market fund assets have soared to $5.73 trillion so far this year, with the bulk of that tally – $4.68 trillion – finding its way into government-targeted funds.

Updated 7:17 AM EST - Martin Baccardax

Retail looking weaker amid muted holiday forecasts 

BJ's Wholesale  (BJ) - Get Free Report and Gap  (GPS) - Get Free Report joined a growing list of retailers that see muted holiday sales action this year, although improving profits at the clothing brands group has shares soaring nearly 20% in pre-market trading.
BJ's, on the other hand, is down nearly 5% after missing third quarter revenues estimates and forecasting flat same-store sales for the holiday period.

Related: Gap stock soars after blasting Q3 earnings forecasts and seeing improving profit margins

Stocks have been closely tracking Treasury bond yields for much of the past few months, and even more so of late now that traders have essentially abandoned bets on a final Federal Reserve rate hike and booked in cuts of around 1% for next year amid a predicted economic slowdown.

Those forecasts have pulled benchmark 10-year note yields more than 60 basis points from the 2007 peak levels reached last month, with the paper trading at 4.418% heading into the early Friday session.

At the same time, 2-year notes were marked at 4.813%, around 30 basis below late October levels, while the U.S. dollar index fell another 0.16% against a basket of its global peers to an early September low of 104.191.

The extended moves lower in yields have powered solid gains for stocks, with the S&P 500 rising more than 10% from its late October lows to sit just 2% south of its 52-week high. 

Earnings optimism, underlying economic strength and a job market that, while weakening, is still producing robust monthly additions with muted wage growth. 

That's helped plough more than $23.5 billion into equity funds over the past week, according to Bank of America's closely-tracked 'Flow Show' report, and could set up a bullish near-term backdrop for stocks heading into the final weeks of the year.

On Wall Street, futures contracts linked to the S&P 500 are priced for a modest 11 point opening bell gain while those linked to the Dow Jones Industrial Average are indicating a 107 point advance. The tech-focused Nasdaq is likely to open 7 points higher last night's closing levels.

In other markets, global oil prices rebounded from their worst single-day decline in four months yesterday, as crude slumped into a bear market – defined as a 20% fall from a recent high – amid concerns over the fate of global demand heading into next year and the ongoing supply gut from a surge in U.S. production.

Brent crude contacts for January delivery, the global pricing benchmark, were last seen trading $1.15 higher at $78.56 per barrel while WTI crude contracts for December, which are tightly-linked to domestic gas prices, added $1.00 to trade at $73.90 per barrel

In Europe, stocks are on pace for a solid 2.7% gain amid a better-than-expected third quarter earnings season and bets on 2024 rate cuts from the European Central Bank. The region-wide Stoxx 600 index was marked 0.96% higher in mid-day Frankfurt trading while Britain's FTSE 100 gained 0.73% in London.

Overnight in Asia, a steep decline for Alibaba  (BABAF) - Get Free Report, which dumped plans to spin-off its cloud division amid the ongoing ban on U.S. chip exports, pulled China and Hong Kong stocks lower and left the MSCI Asia ex-Japan index 0.48% lower into the final hours of trading.

Japan's Nikkei 225, meanwhile, closed 0.48% higher, ending the week at a four-month peak of 33,585.20 points.

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