US stock futures muted as rate uncertainty builds; inflation awaited
Investing.com– U.S. stock index futures tread water in evening deals on Monday after a bumper payrolls report brewed doubts over the Federal Reserve’s plans to cut interest rates sharply.
These doubts were furthered by anticipation of key inflation data due later in the week, with any signs of sticky inflation likely to further dent rate cut expectations.
Wall Street indexes fell sharply on Monday as traders priced out expectations for another outsized rate cut by the Fed, while a storm of other negative factors also weighed.
S&P 500 Futures steadied at 5,746.50 points, while Nasdaq 100 Futures were flat at 19,992.- points by 19:58 ET (23:58 GMT). Dow Jones Futures fell slightly to 42,235.0 points.
Fed expected to cut rates by 25 bps in Nov
Friday’s bumper payrolls reading, while indicating some resilience in the U.S. economy, saw traders drastically scale back expectations for rate cuts by the Fed.
Traders are pricing in an 80.9% chance the Fed will cut rates by 25 basis points in November, and a 19.1% chance the central bank will not cut rates at all, CME Fedwatch showed.
Traders were also seen pricing in a higher terminal rate for the Fed’s current easing cycle.
The central bank had slashed rates by 50 bps in September and announced the start of an easing cycle. But it had still flagged a data-dependent approach to future rate cuts.
The minutes of the September meeting are due on Wednesday.
More closely watched will be consumer price index data due on Thursday, with investors watching for any signs of inflation remaining sticky.
Wall St sinks as rate expectations shift
Bets on a smaller rate cut saw Wall Street clock steep losses on Monday, with the S&P 500 down nearly 1% to 5,695.94 points. The NASDAQ Composite fell 1.2% to 17,926.04 points, while the Dow Jones Industrial Average fell 0.9% to 41,954.24 points, retreating from record highs.
Selling in major technology names also weighed on Wall Street, after Google owner Alphabet Inc (NASDAQ:GOOGL) was ordered to overhaul its Android mobile application store. Negative analyst comments on Amazon.com Inc (NASDAQ:AMZN) and Apple Inc (NASDAQ:AAPL) also spurred selling in both heavyweights.
Risk sentiment was dented by fears of an escalation in the Middle East conflict, while the U.S. braced for another big hurricane- Milton- which is expected to make landfall this week. The country was still reeling from the impact of Hurricane Helene.
The third-quarter earnings season is also set to begin from later this week, with a slew of major banks set to report.