Fed futures pricing for a December rate cut is now little more than 50-50, with regional Fed officials on the central bank's policy committee signaling a pause until the foggy data picture clears up. The September national payrolls report may hit as soon as next week, but there are doubts about whether October jobs and inflation numbers will ever be released due to data collection issues.
Boston Fed boss Susan Collins, a voter on the FOMC this year and considered a 'centrist', was the latest to sound a note of caution. "Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown," she said.
Despite the Fed doubts and Wednesday's lackluster 10-year note auction, Treasury yields remained under wraps. Treasury Secretary Scott Bessent insisted auction sizes of longer-term debt would remain unchanged for the next several quarters and advocated easing banks' so-called supplementary leverage ratios that discourage them from holding Treasuries.
A sharp retreat in crude oil prices helped too. U.S. crude prices fell to their lowest in three weeks as OPEC and the International Energy Agency signaled a surplus in global oil supplies through next year.
The dollar weakened overnight, most clearly against the euro and China's yuan. Intervention concerns lifted Japan's yen from nine-month lows the previous day, when Japan's Prime Minister Sanae Takaichi warned the Bank of Japan not to lift rates too quickly.
But broader yen weakness was evident as it touched a record low against the euro, which also firmed to its highest of the month against the dollar.
Back on Wall Street, stocks held steady on Wednesday - with a rotation of sectors seeing Dow Jones Industrials clock a new record but the tech-heavy Nasdaq ending in the red again.
Even though AMD rallied 9% after the chip designer unveiled a $100 billion data-center revenue target and IBM touched a new record on quantum computing breakthroughs, other tech bellwethers such as Amazon, Tesla, Palantir and Oracle all fell back amid valuation concerns in the sector.
U.S. index futures were flat to negative before Thursday's bell, but global stocks were more buoyant and MSCI's all-country index hit a new record. Chinese stocks outperformed ahead of Friday's major economic releases there, with an earnings beat from social media giant Tencent helping and the yuan hitting its best levels since October.
