US Stock Futures Cheers Potential Rate Cuts, Oil Slips on China Worries

U.S. stock futures are pointing towards a positive open on Wednesday, buoyed by Federal Reserve Chair Jerome Powell's comments hinting at potential interest rate cuts later this year. The Dow Jones Industrial Average is expected to edge up by a mere 16 points, or less than 0.1%. However, the S&P 500 futures are looking at a 0.1% gain, while contracts tracking the tech-heavy Nasdaq are anticipating a slightly larger rise of 0.2%.

This comes on the heels of a mixed session on Tuesday. The Dow closed down slightly, but the S&P 500 and Nasdaq both managed to climb to new record highs. Why the shift in sentiment? Powell's testimony before Congress raised hopes for a policy shift. He expressed concern about the weakening labor market and its potential to dampen inflation. These comments fueled expectations that the Fed could start cutting rates as soon as September, a move that would be a significant boost for stocks.

Market watchers will be closely scrutinizing inflation data due out on Thursday for a clearer picture of the economic landscape. Analysts are keen to see if the Fed's recent interest rate hikes are starting to have a significant impact on economic growth.

Despite some lingering worries, the overall market mood remains upbeat. Investor enthusiasm continues to be fueled by advancements in artificial intelligence and the hope of a "soft landing" for the economy, where inflation eases without triggering a recession.

On the bond side, yields dipped slightly compared to Tuesday. The yield on the benchmark 10-year U.S. Treasury note settled at 4.287%, while the 2-year note yield came in at 4.635%.

Meanwhile, oil prices are facing headwinds. WTI crude oil futures for the U.S. are down 0.4% to $81.12 a barrel, adding to losses from the previous session. Brent crude, the global benchmark, is also down 0.4%, currently trading at $84.33 a barrel. This decline comes after weak inflation data from China sparked concerns about the health of the world's second-largest economy.