U.S. stock index futures were rangebound on Tuesday as investors awaited a crucial inflation report and other economic data that would shape expectations for interest rate cuts from the Federal Reserve and test the recent rally in markets.
Market focus is back on the Fed’s monetary policy path after a frenzy around artificial intelligence (AI) in the previous week eclipsed concerns about delayed rate cuts and pushed the S&P 500 (.SPX), and Dow Jones industrials (.DJI), to new peaks.
The highlight for this week will be the release of January’s personal consumption expenditures price index (PCE)- the Fed’s preferred inflation gauge on Thursday.
If the PCE reading hints at sticky inflation, like recent data on consumer and producer prices, it could impact Fed’s monetary policy and lead traders to further push back their bets on the timing of rate cuts this year.
Reports on gross domestic product (GDP), jobless claims and manufacturing activity, which are due this week, will offer further clues on the timing of rate cuts.
“Favorable data – meaning resilient but not abnormally strong growth, coupled with softening inflation, would allow the market bulls to surf on the ‘goldilocks’ wave,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, referring to the possibility of the Fed bringing inflation down without hurting the economy.
“An uptick in inflation is not good news for the Fed doves, who already dropped the expectation that the Fed would cut rates by March, and then by May, and now they are trimming the June cut expectations.”
Currently, 63% of traders expect the Fed to start cutting rates by June, down from nearly 98% at the end of January, according to the CME Group’s FedWatch tool. Bets for a July rate cut stand at 83.6%.
Later on Tuesday, investors will get data on durable goods followed by a survey on consumer confidence in February from the Conference Board.
Focus will also be on comments from some Fed policymakers, including voting members Atlanta Fed President Raphael Bostic, New York Fed chief John Williams and Fed Board Governor Christopher Waller, who are scheduled to speak this week.
At 5:20 a.m. ET, Dow e-minis were up 2 points, or 0.01%, S&P 500 e-minis were up 4.25 points, or 0.08%, and Nasdaq 100 e-minis were up 34.75 points, or 0.19%.
Tesla (NASDAQ: TSLA), outperformed megacap peers, rising 1.5% in premarket trading, while Micron Technology (MU.O), a beneficiary of the AI rally, climbed 2.6% after a 4% advance in the previous session.
Adding to the gains, Zoom Video Communications (ZM.O), jumped 12.0% as the video-conferencing provider posted better-than-expected quarterly results on strong demand for its expanding product portfolio.
Among other stocks, Unity Software (U.N), plunged 14.5% after the videogame software provider forecast full-year revenue below estimates.
Source: https://www.reuters.com/markets/us/us-stock-futures-edge-up-ahead-economic-data-2024-02-27/
