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 September 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 50bps be the start of the 50s or a one-off larger move to start the cycle? Would 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. However, analysts attributed the optimism to signs of a robust economy rather than rate-cut expectations.
At 07:00 a.m. ET, Dow E-minis were up 85 points, or 0.21%, S&P 500 E-minis were up 2 points, or 0.03%, and Nasdaq 100 E-minis were down 38.5 points, or 0.20%.
Futures tracking small caps, which tend to do well with lower borrowing costs, outperformed with a 0.72% rise. The Russell 2000 index has gained over 7% year-to-date and hit its highest level in over a week on Friday.
In economic data, retail sales, weekly jobless claims, housing starts, and industrial production are due through the week.
Among rate-sensitive growth stocks, Nvidia (NASDAQ: NVDA) slipped 0.9%, while Meta Platforms (NASDAQ: META) inched up 0.15% and Tesla (NASDAQ: TSLA) rose 0.44% in premarket trading.
Intel (NASDAQ: INTC) climbed 2% 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 (NASDAQ: DJT) added 3.7% 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 (NASDAQ: MSTR) down 2.2% and Riot Platforms (NASDAQ: RIOT) slipping 1.5%, tracking a 2% fall in bitcoin prices.
Alcoa (NYSE: AA) gained 1.4% after the aluminum maker said on Sunday it would sell a 25.1% stake in its joint venture with Saudi Arabia’s Ma’aden for $1.1 billion.
(Source: Reuters)
Kevin Putnam is a financial journalist and editor based in New York. He specializes in editing news and analysis related to U.S. stock market.
