(Reuters) – U.S. stock index futures fell on Monday as investors scaled back bets on the scope of the Federal Reserve’s rate cuts this year, ahead of key inflation data, comments from policymakers and the third-quarter earnings season starting later this week.
According to the CME’s FedWatch tool, investors estimated a more than 93% chance of a 25 basis point rate cut during the November Fed meeting. Just a week ago, markets were hoping for a second, excessive cut of 50 basis points.
However, an impressive nonfarm payrolls report last Friday showed that the economy unexpectedly added the most jobs in six months, indicating a still robust labor market.
Meanwhile, US Treasury yields rose, with 10-year benchmark bond yields hitting their highest level since early August.
The rise in yields put pressure on price-sensitive mega-cap growth stocks, sending Nvidia down 1.5%, Amazon.com 2.1% and Apple 1.5% in premarket trading.
Among other things, Pfizer shares rose 2.7% on a report that activist investor Starboard Value has taken a roughly $1 billion stake in the drug giant.
At 5:31 a.m. ET, the U.S. 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 the Dow E-minis were down with 197 points, or 0.46%.
As markets continue to refine their expectations for rate cuts, most market watchers remain optimistic about the underlying strength of the economy and the outlook for equities.
Goldman Sachs raised its target for the S&P 500 for the end of 2024 from 5,600 to 6,000, and also lowered the chance of a US economic recession from 20% to 15%.
The benchmark S&P index closed just above 5,751 on Friday, while the Dow Jones Industrial Index hit a record high after the jobs report.
Consumer Price Index data, the week’s most-watched data event, is due Thursday.
Several Fed officials are also scheduled to speak this week, with remarks expected later on Monday from Michelle Bowman, Neel Kashkari, Raphael Bostic and Alberto Musalem.
Third-quarter earnings reports for S&P 500 companies also start this week, with major banks like JP Morgan Chase, Wells Fargo and BlackRock scheduled for Oct. 11.
Earnings results will be a key test of Wall Street’s rally this year; the S&P 500 is up about 20% this year and is near record 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)