Wall Street futures rose on Thursday over expectations the Federal Reserve could pause interest rate hikes in September, while investors awaited Arm Holdings’ stock market debut after its IPO turned out to be the biggest since 2021.
Shares of Arm Holdings will make their widely anticipated debut on the Nasdaq after the chip designer notched a $54.5 billion valuation in its offering, priced at $51 per share, on Wednesday.
Both the Nasdaq and the S&P 500 gained on Wednesday following data that showed the annual rise in core consumer prices, excluding volatile items like food and energy, was the smallest in nearly two years.
Rising oil prices, however, could keep inflation at elevated levels, analysts said. Higher gasoline prices pushed the headline inflation to a 14-month high, while stickiness in growth of prices of services kept alive the prospects of a November hike.
“The Fed may latch on to energy prices as a reason to strike a relatively hawkish tone at next week’s FOMC meeting as it looks to ensure financial conditions remain relatively tight to continue making progress on core inflation,” said Emin Hajiyev, senior economist at Insight Investment.
“We are at or very close to the top of the hiking cycle but see one additional rate hike into year-end as a possibility.”
Traders see a 97% chance of the Fed holding rates in September and a near 60% likelihood of a November pause, according to the CME FedWatch Tool.
Citigroup (NYSE:C) also expects the Fed to hike interest rates by 25-basis points in November, compared with its previous forecast of a September hike.
All eyes will be on producer prices data and retail sales for August and weekly jobless claims at 8:30 a.m. ET for further clues on the trajectory for U.S. interest rates ahead of the Federal Reserve’s policy meeting next week.
Major growth stocks, including Apple (NASDAQ:AAPL), Google (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Amazon.com (NASDAQ:AMZN) edged up between 0.4% and 0.7%, with the two-year U.S. Treasury yield, which best reflects short-term interest rate expectations, trading below the 5% mark.
Meanwhile, investors largely expect another European Central Bank rate hike later in the day, which will take interest rates to a record high, amid sticky inflation and a deteriorating economy.
At 7:02 a.m. ET, Dow e-minis were up 109 points, or 0.32%, S&P 500 e-minis were up 19.5 points, or 0.43%, and Nasdaq 100 e-minis were up 71.5 points, or 0.46%.
Among individual stock moves, Vital Energy dropped 8.5% premarket after it signed deals valued at about $1.17 billion to expand its acreage in the Permian Basin.
HP (NYSE:HPQ) fell 1.5% after Warren Buffett’s Berkshire Hathaway (LONDON:BRK) sold about 5.5 million shares of the company.
Visa (NYSE:V) slipped 2.0% after the payment processing giant said it was engaging with Class B shareholders on a proposal to convert their shares to Class C or Class A.