Jan 9, 2024: U.S. stock index futures took a step back on Tuesday, pausing after a robust rally in the previous session. Investor sentiments recalibrated regarding the potential for imminent rate cuts, especially in anticipation of forthcoming inflation reports.
Monday witnessed a strong finish across Wall Street, notably with the Nasdaq, centered on technology, surging over 2% to mark its most significant gain since November 2023. Simultaneously, the S&P 500 approached its highest closing level seen two years ago.
The market buoyancy was fueled by a resurgence in high-capacity growth stocks and semiconductor entities like Nvidia (NASDAQ:NVDA), which achieved a record high after introducing new artificial intelligence components. Nvidia saw a 0.3% rise in early premarket trading.
Attention remains fixated on two sets of December inflation reports scheduled later this week, potentially offering insights into the Federal Reserve’s monetary policy course. Analysts anticipate a deeper scrutiny of producer inflation figures following recent declines in crude oil prices.
UBS analysts emphasized, “Core inflation data continues to signal the necessity of a somewhat restrictive monetary policy.” They further outlined a scenario envisioning a soft economic slowdown, slightly below trend growth, and a Federal Reserve rate cut of 100 basis points, commencing in May, as inflation approaches the 2% Fed target.
Market observers now perceive a 58% likelihood that the central bank might reduce interest rates by at least 25 basis points in March, according to the CME Group’s (NASDAQ:CME) FedWatch tool. This estimate has slightly decreased from nearly 64% in the previous session, as policymakers persist in dampening hopes of initiating the easing cycle ahead of schedule.