U.S. stock futures rose Friday after, continuing the previous session's rally. Wall Street is trying to unwind an earlier weekly slump in stock prices.

Futures tied to the three major indexes rose between 0.6 percent, and 1 percent. From Monday to Friday, the Dow Jones rose 2.64 percent, the S&P 500 rose 3.29 percent, and the Nasdaq Composite rose 4.02 percent. All three indexes are poised to break a three-week losing streak.

It appears that recession fears remain a major concern for investors amid high inflation and aggressive interest rate hikes, hence the current rebound in stock prices may be difficult to sustain over the long term. And it may remain so until a better economic outlook emerges.

Federal Reserve Chairman Jerome Powell, in his speech to Congress, reiterated that his commitment to limiting price increases is unconditional. Statements are coming from the Fed to raise interest rates again by 75 basis points in July, followed by several more increases of 50 basis points each.

Market estimates are that the federal funds rate could rise to 3.5-3.75 percent this year, which would be the peak of the current cycle. The valuation of subsequent Fed actions in 2023-2024 seems to indicate the possibility of lowering interest rates to the level of 2.75 percent. The market may therefore begin to price the transition to loosening monetary policy, which in turn may be more beneficial for bonds, but also for risky assets - shares or even cryptocurrencies.

The U.S. dollar, whose strength could come from expectations for interest rate hikes in the U.S., may already be rallied by the market, especially in light of growing expectations for interest rate hikes by the European Central Bank, the Bank of Switzerland or finally the Bank of Japan, where inflation is the highest in 7 years and exceeds the Bank's target of 2 percent. In the near future, investors may turn away from the dollar if expectations for actions of the mentioned central banks come true.

Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)

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Rebounding on Wall Street. Dollar in trouble? (conotoxia.com)