U.S. stock futures painted a mixed picture as the market geared up for a new month of trading, following a robust performance by all three major indices on Wall Street throughout May.
As of 06:23 ET (10:23 GMT), the Dow futures contract had edged lower by 32 points or 0.1%, while S&P 500 futures had inched up by 10 points or 0.2%. Nasdaq 100 futures had shown more significant gains, rising by 79 points or 0.4%.
The surge in Wall Street indices on Friday was fueled by the release of personal consumption expenditures price index data, the Federal Reserve’s preferred inflation gauge, which aligned with expectations for April. Although the PCE reading indicated a slight cooling in inflation, it remained notably above the Fed’s 2% annual inflation target. This data, combined with other recent indicators signaling a moderation in the U.S. economy, prompted speculation that the central bank might initiate interest rate cuts as early as September.
Traders were observed pricing in a roughly 47% chance for a 25 basis point rate cut in September, alongside a roughly 45% chance that the Fed would maintain rates, according to the CME Fedwatch tool. This positioning contributed to the positive momentum in U.S. stocks.
On Friday, the S&P 500 climbed 0.8% to 5,277.51 points, while the Dow Jones Industrial Average surged 1.5% to 38,686.32 points. However, the NASDAQ Composite lagged behind due to weakness in tech stocks, ending the day flat at 16,735.02 points.
Looking ahead, market participants are eagerly anticipating the release of nonfarm payrolls data for May later this week, which is expected to provide further insights into the labor market—another crucial factor for the Fed’s decision-making on interest rates. The central bank is scheduled to meet next week, with expectations leaning towards maintaining rates at their current levels. However, any indications or commentary regarding future rate decisions will be closely monitored.
Fed policymakers have consistently emphasized patience regarding rate reductions, expressing a desire for more evidence that inflation is sustainably moving back towards their 2% target. Minneapolis Fed President Neel Kashkari echoed this sentiment on Monday, suggesting that rates may need to remain unchanged for an “extended” period of time, as reported by the Financial Times.