Reuters
Investors are pricing in a more than 93% chance of a 25 basis point rate cut at the Fed’s November meeting, according to CME’s FedWatch tool. Just a week ago, markets were holding out hope for a second massive 50 basis point cut.
However, a bumper September nonfarm payrolls report last Friday showed the economy unexpectedly added the most jobs in six months, pointing to a still strong labor market.
Meanwhile, US Treasury yields recovered, with the benchmark 10-year bond yield hitting its highest level since early August.
Rising yields put pressure on rate-sensitive mega-cap growth stocks, sending Nvidia down 1.5%, Amazon.com down 2.1% and Apple down 1.5% in pre-date trading. marketing.
Among other factors, Pfizer shares rose 2.7% after a report that activist investor Starboard Value had acquired a roughly $1 billion stake in the pharmaceutical giant.
At 5:31 a.m. ET, the US S&P 500 E-minis were down 32.75 points, or 0.56%, the Nasdaq 100 E-minis were down 148 points, or 0.73%, and Dow E-minis were down 197 points, or 0.46%.
While markets continue to fine-tune their expectations for interest rate cuts, most market watchers remain optimistic about the underlying strength of the economy and the outlook for stocks.
Goldman Sachs raised its target for the S&P 500 by the end of 2024 to 6,000 from 5,600, and also reduced its chances of a US economic recession from 20% to 15%.
The benchmark S&P index closed Friday just above 5,751, while the Dow Jones industrial average hit a record close after the jobs report.
Consumer Price Index data, the most watched data event this week, is due out on Thursday.
Several Fed officials are also scheduled to speak this week, with comments from Michelle Bowman, Neel Kashkari, Raphael Bostic and Alberto Musalem expected later on Monday.
Third-quarter earnings for S&P 500 companies also begin this week, with major banks including JP Morgan Chase, Wells Fargo and BlackRock scheduled for October 11.
The gains will be a major test of Wall Street’s rally this year: The S&P 500 is up about 20% so far this year and is near all-time highs.
Other risks also remain on the table, including escalating geopolitical tensions in the Middle East.
(Reporting by Lisa Mattackal in Bengaluru; Editing by Shinjini Ganguli)