Stock Market Today: S&P 500 Building on Gains, Dow, Nasdaq Set to Open Up; Nvidia, Lumen, More Movers; Treasury Yields

Futures on the three main indexes are little changed early Friday. All of them finished Thursday between 0.5% and 0.7% lower over the past five days.

Friday should be a quiet day for data and earnings. Things will pick up on that front next week, though, with a raft of new information coming next week. Inflation, producer prices, and retail sales among them.

Japan was at the nexus of global market turmoil earlier this week, but on Friday cooler heads had prevailed.

The benchmark Nikkei index finished 0.6% higher on the day. Over the past five days it has dropped 2.5% and over the past month it’s down 15%. Since the start of the year, it’s still up 4.7%.

All that seems pretty tame, at least compared with earlier this week. On Monday, Japanese stocks had their worst day since 1987. Then they started roaring back on Tuesday and have climbed further since.

The source of the ructions was the convergence of U.S. and Japanese interest rates–specifically, U.S. rates set to move lower, while Japanese rates are on course to move higher. That, in turn, strengthened the yen against the dollar.

The currency was like a coiled spring after weakening to record lows earlier this year–for much of the first half, expectations for Fed cuts were pushed back at the same time the Bank of Japan hesitated to start tightening.

Once the first moves were locked in, the yen jumped like a jack-in-the-box. That, in turn, disrupted the now-famous carry trade, in which investors borrow cheaply in yen to buy higher-yielding assets elsewhere. That trade is still possible, but it’s significantly less profitable than it used to be.

For a while, it looked like financial markets worldwide were in trouble. But the carry trade, while incredibly popular, is hardly a lynchpin of the system. Things are calming down now. They could flare up again, but traders might not be quite as jumpy the next time.

Government bond yields are expected to fall over the next six to 12 months on the back of anticipated interest-rate cuts, said Karsten Junius, chief economist at J. Safra Sarasin Sustainable Asset Management.

The asset manager expects three rate cuts by the Federal Reserve, the European Central Bank, and the Bank of England this year—and one cut by the Swiss National Bank.

It favors intermediate maturities. The financial market turbulences this week have highlighted that macro risks are shifting from inflation to growth, carry trades are vulnerable to sharp reversals in late cycle environments and expectations regarding the additional earnings potential from artificial intelligence have their limits as well, Junius added.

Gold futures were broadly flat at $2,463.5 a troy ounce, holding ground amid stabilization in the broader financial market and cooling recession fears, ING said.

The precious metal set a record high of $2,522.5 an ounce on Aug. 2, before slumping as low as $2,403.8 on worse-than-expected U.S. economic data and a global stock selloff.

This slump was largely driven by profit-taking and holders of gold liquidating their positions to cover losses elsewhere in the market. Still, expectations of a U.S. interest-rate cut in September continue to support gold fundamentally, ING analysts said in a note.

U.S. initial jobless claims on Thursday—the weekly unemployment report—were also better than expected and helped ease economic concerns in the immediate terms, ING added.