U.S. stock index futures exhibited a narrow trading range on Tuesday as investors awaited pivotal inflation data alongside other economic indicators, poised to influence expectations regarding potential interest rate adjustments by the Federal Reserve and to test the recent market upswing.
The spotlight now shifts back to the Federal Reserve’s monetary policy trajectory, following a surge in interest surrounding artificial intelligence (AI) the previous week, which overshadowed concerns regarding postponed rate cuts, propelling the S&P 500 and Dow Jones to unprecedented heights.
The focal point for this week will be Thursday’s release of January’s personal consumption expenditures price index (PCE) – the Federal Reserve’s favored metric for gauging inflation.
Should the PCE figures suggest persistent inflation, akin to recent consumer and producer price data, it could impact the Federal Reserve’s monetary policy decisions, prompting traders to adjust their expectations regarding the timing of potential rate cuts throughout the year.
Additionally, reports on gross domestic product (GDP), jobless claims, and manufacturing activity, all slated for release this week, will provide further insights into the potential timing of rate adjustments.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, remarked, “Favorable data – indicating resilient yet not excessively robust growth, alongside easing inflation, could empower market bulls to ride the ‘goldilocks’ trend,” alluding to the scenario where the Federal Reserve manages to curb inflation without stifling economic growth.
She continued, “An uptick in inflation spells trouble for Federal Reserve doves, who have already tempered expectations regarding rate cuts initially anticipated for March, then May, with June now in question.”
Presently, 63% of traders anticipate Federal Reserve rate cuts commencing by June, marking a decline from nearly 98% at January’s close, according to the CME Group’s FedWatch tool, while expectations for a July rate cut stand at 83.6%.
Later today, investors anticipate data releases on durable goods, followed by the Conference Board’s consumer confidence survey for February.
Furthermore, attention will be directed towards comments from several Federal Reserve policymakers, including Atlanta Fed President Raphael Bostic, New York Fed chief John Williams, and Fed Board Governor Christopher Waller, all scheduled to speak this week.
As of 5:20 a.m. ET, Dow e-minis indicated a marginal gain of 2 points, or 0.01%, S&P 500 e-minis reflected a rise of 4.25 points, or 0.08%, and Nasdaq 100 e-minis signaled an increase of 34.75 points, or 0.19%.
Tesla exhibited notable performance among mega-cap peers, with a 1.5% increase in premarket trading, while Micron Technology, benefiting from the AI rally, surged 2.6% following a 4% advance in the previous session.
Furthermore, Zoom Video Communications witnessed a significant uptick of 12.0% as the video-conferencing provider posted quarterly results surpassing expectations, driven by robust demand for its expanding product portfolio.
Conversely, Unity Software experienced a sharp decline of 14.5% after the videogame software provider forecasted full-year revenue below analyst estimates.
