Futures advance as softening inflation signs fan rate cut hopes

Apr 1, 2024 10:13 pm | News

By Shristi Achar A and Shashwat Chauhan

(Reuters) -Futures tracking Wall Street’s main stock indexes rose on Monday after the latest inflation print showed moderating consumer prices, bolstering hopes of an early interest rate cut by the Federal Reserve.

The Commerce Department’s data on Friday showed the personal consumption expenditures (PCE) price index – the Fed’s preferred inflation gauge – rose 0.3% in February, compared with the estimates of a 0.4% increase, according to economists polled by Reuters.

The report strengthened rate-cut bets, with money markets pricing in a 66% chance of at least a 25 basis point cut in June, compared with 55% a day before the data was released, according to the CME Group’s FedWatch tool.

Fed Chair Jerome Powell said on Friday that the latest U.S. inflation data was “along the lines of what we would like to see” – comments that appeared to keep the central bank’s baseline for interest rate cuts this year intact.

“If activity holds up, the Fed might deliver three rate cuts this year. But a further softening in labor markets has us expecting five rate cuts this year,” Citigroup analysts wrote in a note.

Market participants, however, expect the central bank to stand pat on rates at the upcoming policy meeting in May.

Most megacap growth stocks, which stand to benefit from lower interest rates, rose in premarket trading, with Microsoft, Nvidia and Tesla up around 0.6% each.

That indicates a solid start to the second quarter, after the benchmark S&P 500 rose 10.16% in the first three months of the year, its biggest gain since 2019. As of last close, the blue-chip Dow sits less than 1% away from breaching the 40,000 level for the first time.

The gains on Wall Street have been powered by optimism around artificial intelligence, robust earnings and hopes of a soft landing – where inflation moderates without causing an economic slowdown.

On the data front, the S&P Global’s final manufacturing PMI report is expected at 9:45 a.m. ET and the ISM manufacturing PMI report is due at 10:00 a.m. ET.

At 7:10 a.m. ET, Dow e-minis were up 119 points, or 0.3%, S&P 500 e-minis were up 18.25 points, or 0.34%, and Nasdaq 100 e-minis were up 86.25 points, or 0.47%.

Most chipmakers also gained, with Micron Technology, Advanced Micro Devices and Marvell Technology up between 0.7% and 1.2%.

Spirit Airlines gained 2.9% after the budget carrier said it would get a monthly credit from International Aero Engines through the end of 2024 as compensation for not being able to operate its jets with engine issues.

United Parcel Service added 1.9% after the world’s largest parcel delivery company said it would become the United States Postal Service’s (USPS) primary air cargo provider, replacing rival FedEx.

AT&T fell 2.7% after the wireless carrier said it was investigating a data leak that could have impacted nearly 73 million current and former accounts.

(Reporting by Shristi Achar A and Shashwat Chauhan in Bengaluru; Editing by Anil D’Silva)

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