Friday, November 8, 2024

Futures kick off Fed meeting week on cautious note

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(Reuters) – U.S. stock index futures were flat to slightly higher on Monday as caution prevailed ahead of a pivotal monetary policy decision by the Federal Reserve later in the week, with investors pricing in a steep reduction in borrowing costs.

Ever since Fed Chair Jerome Powell hinted at an upcoming rate cut late last year, markets have embarked on a bull run, with the S&P 500 and the Dow now near record highs.

However, following a mixed batch of economic data and comments from a former policymaker in the last few weeks, traders swayed in their bets on what decision the central bank will arrive at during its Sept. 17 to 18 meeting.

Odds for a 50-basis-point cut are at 59% from 30% a week ago, according to the CME FedWatch Tool, which showed a 41% probability for a 25-basis-point reduction. There is concern that an outsized move could mean the Fed sees the economy cooling at a faster pace.

“As important as the 25 vs 50 debate will be the communication from the Fed. Would a 50bps be the start of 50s or a one off larger move to start the cycle? Would a 25bps mean the bar for subsequent 50s is high? There will be lots to digest,” a group of strategists at Deutsche Bank led by Jim Reid said in a note.

The benchmark index and the tech-heavy Nasdaq notched their biggest weekly jump in about 11 months on Friday, although analysts attributed the optimism to signs of a robust economy rather than rate-cut expectations.

At 05:32 a.m., Dow E-minis were up 95 points, or 0.23%, S&P 500 E-minis were up 6.5 points, or 0.12% and Nasdaq 100 E-minis were down 4.5 points, or 0.02%

Futures tracking small caps, which tend to do well with lower borrowing costs, outperformed with a 0.90% rise.

Economic data due through the week is light, with retail sales, weekly jobless claims, housing starts and industrial production on tap.

Rate-sensitive growth stocks such as Nvidia slipped 0.40%, while Meta inched up 0.30% and Tesla rose 0.60% in premarket trading.

Intel Corp climbed 3.7% after a report showed the chipmaker had officially qualified for as much as $3.5 billion in federal grants to make semiconductors for the U.S. Department of Defense.

Trump Media & Technology added 4.5% after an apparent second assassination attempt on the Republican candidate and former president on Sunday, weeks before the closely watched U.S. presidential election.

Crypto stocks trended lower, with Microstrategy down 2% and Riot Platforms slipping 1.4%, tracking a 1.7% fall in bitcoin prices.

(Reporting by Johann M Cherian in Bengaluru; Editing by Pooja Desai)

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