By Lisa Pauline Mattackal and Johann M Cherian
(Reuters) -Nasdaq futures advanced on Thursday as chip stocks gained ahead of crucial inflation and labor market data that could sway expectations of interest rate cuts from the Federal Reserve.
Investor sentiment also got a boost from softer-than-expected U.S. consumer inflation data and Fed Chairman Jerome Powell’s acknowledgement that progress had been made in tackling price pressures.
Benchmark Treasury yields slid on Wednesday, helping the and Nasdaq close at record highs. Solid gains in a handful of megacap technology stocks and expectations of a soft landing for the economy have been key factors behind the two indexes rallying this year.
Markets trimmed bets on a September start to rate cuts, with odds standing at over 60%, according to the CME’s FedWatch tool.
Despite the central bank projecting only one rate reduction this year, traders are pricing in nearly two 25 basis point cuts, according to LSEG data.
“Ultimately, whether there are one or two rate cuts this year matters much less than the overall path of policy rates, the FOMC remains entirely data-dependent, but it acknowledges that policy must stop being restrictive before it harms the economy,” said Paolo Zanghieri, senior economist at Generali (BIT:) Investments.
“We do not think that the current meeting rules out our expectation of two rate cuts this year,” Zanghieri said.
UBS Global Research said it now expects the Fed to cut interest rates in December instead of September, while Goldman Sachs and Morgan Stanley continue to expect the first cut in September.
May’s producer price index reading and weekly jobless claims data are due before markets open on Thursday, and New York Fed President John Williams will moderate a panel later in the day.
A rally in tech stocks persisted in premarket trading, with shares of Broadcom (NASDAQ:) soaring 13.5% after the company raised its forecasts for revenue from chips designed for artificial intelligence operations and announced a 10-for-1 forward stock split.
Peer Nvidia (NASDAQ:) rose 2.2%, though shares of other megacaps Amazon (NASDAQ:), Meta Platforms (NASDAQ:) and Alphabet (NASDAQ:) slipped between 0.2% and 0.4%.
At 7:10 a.m. ET, Dow e-minis were down 131 points, or 0.34%, were up 5 points, or 0.09%, and were up 117.25 points, or 0.6%.
The weakness in comes after the blue-chip index closed roughly flat in the previous session.
Futures tracking the more economically sensitive small-cap also fell 0.5% after the index notched its best day in over a month on Wednesday.
Apple (NASDAQ:) edged down 0.2%, after jumping to an all-time-high in the previous session and briefly overtaking Microsoft (NASDAQ:) as the world’s most valuable company.
Tesla (NASDAQ:) leapt 6.8% after Elon Musk said company shareholders were voting to approve his $56 billion pay package and to move the electric-vehicle maker’s legal home to Texas.
Virgin Galactic plunged 9.1%, a day after announcing a 1-for-20 reverse stock split.
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