The excitement of U.S. stock index futures took a slight dip on Monday as investors reconsidered the Federal Reserve rate cuts, with crucial inflation data, policymakers’ remarks, and the upcoming third-quarter earnings season setting the tone for the market. Here’s a breakdown of what’s happening and what to watch out for:
- Investors are currently pricing in a high probability of a 25 basis point rate cut at the November Fed meeting, compared to hopes of a larger 50 basis point reduction just a week ago.
- The unexpected surge in September non-farm payrolls last Friday highlighted a robust job market, causing U.S. Treasury yields to climb to their highest levels since August.
- The increase in yields put pressure on rate-sensitive megacap growth stocks, with companies like Nvidia, Amazon.com, and Apple experiencing premarket declines.
- On the flip side, Pfizer’s shares surged after news of activist investor Starboard Value’s substantial investment in the pharmaceutical giant.
Despite the fluctuating expectations around interest rates, the market sentiment remains optimistic about the economy and equity outlook. Look out for these upcoming events:
- Goldman Sachs raised its S&P 500 target for 2024 and revised the odds of a U.S. economic recession lower.
- Consumer price index data, set for release on Thursday, is a key event to monitor this week.
- Various Fed officials are scheduled to speak, including Michelle Bowman, Neel Kashkari, Raphael Bostic, and Alberto Musalem.
- The earnings season for S&P 500 companies kicks off, with major banks reporting on October 11, providing a crucial test for Wall Street’s rally.
- Other factors to consider include escalating geopolitical tensions in the Middle East.
As the market navigates these uncertainties, it’s essential to stay informed and keep an eye on these developments that can impact investment decisions and market trends.
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