U.S. stock index futures rose on Tuesday, bouncing back from a selloff in the previous session. Investors turned their focus to key inflation data and third-quarter earnings later this week for fresh insights into the Federal Reserve’s interest rate path. All three major indexes closed down around 1% on Monday.
A jump in Treasury yields, concerns about rising conflict in the Middle East, and a repricing of U.S. rate expectations pressured equities. U.S. Treasury yields retreated slightly from Monday’s highs. However, the yield on the benchmark 10-year note remained above 4%.
Strong economic data last week prompted investors to trim bets on the scope of Federal Reserve interest rate cuts over the rest of this year. Traders have priced in a nearly 89% chance of a 25 basis point interest rate cut from the Fed at its November meeting. Bets on no rate change at the meeting also crept up slightly.
“We did see a strong sell-off yesterday, so it’s not unnatural to see a slight bounce, particularly as there’s a vacuum of fresh data today,” said Fiona Cincotta, senior market analyst at City Index. “We’re in a lull ahead of the busy end of the week.
Fed insights impact futures positively
If we do get a hotter-than-expected inflation read, that might unnerve the markets quite quickly.”
The CBOE Volatility Index, Wall Street’s “fear gauge,” retreated from Monday’s highs but was still trading around a one-month high at 22.04. PepsiCo lost about 1% after the packaged food giant posted a surprise drop in third-quarter revenue and cut its forecast for annual sales growth. The S&P 500 is expected to report a 3.2% year-over-year earnings per share (EPS) rise in the third quarter, “with gains for six of its 11 sectors,” said Sam Stovall, chief investment strategist at CFRA Research.
Fed Governor Adriana Kugler said earlier on Tuesday she supported further interest rate cuts if inflation continues to ease, as she expects. Some Fed officials, including John Williams and Alberto Musalem, said on Monday that it would be appropriate to reduce rates over time. A number of other Fed officials are expected to speak later in the day, including Raphael Bostic, Susan Collins, and Philip Jefferson.
International trade balance data for August is also due later on Tuesday. Investors were also watching out for the impacts of category 4 Hurricane Milton on the markets. Shares of Honeywell International rose 2.3% after a report that the company is planning to spin off its advanced materials business.
U.S.-listed shares of Chinese companies slid, tracking losses in domestic stocks, as optimism over China’s stimulus measures waned due to the absence of more specific details. Shares of Alibaba Group, JD.com, and PDD Holdings slumped between 7.4% and 10.2%.
- Yahoo.”US Futures Rise as Focus Turns to Inflation Data: Markets Wrap”.
- Yahoo.”Futures rise with inflation data, earnings in view”.
- Bloomberg.”Chinese Equity Rally Falters, Asian Stocks Drop: Markets Wrap”.