U.S. stock index futures were marginally higher on Monday as investors braced for a data-packed week, with a focus on U.S. consumer prices that could provide strong cues about the Federal Reserve’s interest rate move in September.
Markets rounded off last week amid heightened volatility, beginning with a sharp selloff on a weaker-than-expected July jobs report that sparked recession fears, and investors unwound currency carry trade positions involving the yen.
Both the S&P 500 and the Nasdaq recouped most of their losses in the last two sessions, ending with marginal weekly losses.
Investors are likely to stay on the sidelines this week until Wednesday’s U.S. consumer price index (CPI) reading, which is expected to show headline inflation in July accelerated by 0.2% on a monthly basis, but remain unchanged at 3% on a year-on-year basis.
Money markets are evenly split between a 50- and a 25-basis-point (bps) cut in U.S. interest rates in September, expecting a total easing of 100 bps by the end of 2024, according to CME’s FedWatch Tool.
Figures for July U.S. retail sales on Thursday are likely to show marginal growth, and investors expect that any weakness in the data could reignite fears of a consumer slowdown and a potential recession.
Earnings reports from Walmart (NYSE: WMT) and Home Depot (NYSE: HD), due later this week, will also be crucial for clues on consumer spending in the world’s largest economy.
“With improving liquidity, more reasonable tech valuations, and the potential for gradual Fed rate cuts starting in September, investors should navigate summer turbulence with a steady focus on long-term opportunities,” said Seema Shah, chief global strategist, Principal Asset Management.
Fed Governor Michelle Bowman softened her usually hawkish tone ever so slightly on Saturday, noting some further “welcome” progress on inflation in the last couple of months even as she said inflation remains “uncomfortably above” the central bank’s 2% goal and subject to upside risks.
The CBOE Volatility Index, Wall Street’s fear gauge, was up slightly at 20.57 points, but much lower than the peak of 65.73 a week earlier.
At 06:45 a.m. ET, Dow E-minis were up 33 points, or 0.08%, S&P 500 E-minis were up 10.75 points, or 0.2% and Nasdaq 100 E-minis were up 50.75 points, or 0.27%.
Most megacap and growth stocks were up in premarket trading, with Nvidia (NASDAQ: NVDA) and Amazon.com (NASDAQ: AMZN) amongst the top gainers with a 0.7% increase each.
Starbucks (NASDAQ: SBUX) climbed 2.8% on reports that activist investor Starboard Value, which holds a stake in the coffee giant, wants the company to take steps to improve its stock price.
Robinhood Markets (NASDAQ: HOOD) added 1% after Piper Sandler upgraded the stock to “overweight” from “neutral” and also raised its target price.
KeyCorp (NYSE: KEY) jumped 10.2% after Canada’s Scotiabank bought a minority stake in the U.S. regional lender in an all-stock deal worth $2.8 billion.
Hawaiian Electric (NYSE: HE) dropped 7.1% after the utility firm raised “going concern” doubts. The company disclosed that it did not have a financing plan in place for the $1.99 billion Maui wildfire settlement it reached earlier this month.
(Source: Reuters)
