(Reuters) – U.S. stock index futures edged higher as investors awaited a batch of economic data and clung to hopes the Federal Reserve would deliver a supersized interest-rate cut at its monetary policy meeting, which starts on Tuesday.
After a choppy start to the week, the ended its sixth straight session higher and near a record high on Monday, helped by Financials and Energy stocks.
The Dow also closed at a record high. However, the Nasdaq ended the session lower as investors rotated out of tech stocks, which have led much of this year’s rally.
Microsoft (NASDAQ:) rose nearly 2.0% in premarket trading on the day after the AI-frontrunner’s board approved a new $60-billion share buyback program and hiked its quarterly dividend by 10%.
Among growth stocks, Alphabet (NASDAQ:) and Tesla (NASDAQ:) added 0.63% and 0.57%, respectively, while Nvidia (NASDAQ:) inched up 0.30%. The yield on two-year Treasury bonds hovered near two-year lows. [US/]
At 05:35 a.m. ET, Dow E-minis were up 84 points, or 0.20%, S&P 500 E-minis were up 17.75 points, or 0.31% and E-minis were up 99 points, or 0.51%.
In economic data, reports on industrial production and retail sales for August, expected later in the day, could influence investor expectations on the size of the central bank’s first interest-rate cut this year.
Fed officials are slated to kickstart a two-day meeting and traders are betting on a 67% probability the world’s most influential central bank will decide to lower borrowing costs by a bigger 50 basis points, according to the CME Group’s (NASDAQ:) FedWatch Tool.
Odds favoring a smaller 25 bps reduction have slipped to 33% from 66% a week earlier, as investors focused on remarks from a former policymaker supporting an outsized move and signs of a cooling labor market, among other indicators.
However, Mohit Kumar, chief Europe economist at Jefferies, said in a note that a “‘safer’ approach for (Fed Chair Jerome) Powell would be to cut by 25bp”, but keep the side door open for a 50 bps cut at later meetings. “Proximity of (U.S.) elections also imply that it would be a more politically neutral stance.”
September has historically been weak for U.S. equities, with the benchmark S&P 500 down about 1.20% for the month on an average since 1928. The index has lost about 0.30% so far this September.
Still, a survey of BofA fund managers showed global investor sentiment improved in September 2024 for the first time since June on optimism around a soft landing and rate cuts by the U.S. Federal Reserve.
Among other movers, Intel (NASDAQ:) jumped 7.0% after signing up Amazon.com (NASDAQ:)’s cloud services unit as a customer to make custom artificial-intelligence chips.
Viasat dropped 5.0% after brokerage J.P.Morgan downgraded it to “neutral” from “overweight”.
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