Futures muted as caution prevails in run-up to Powell's remarks

[December 01, 2023]  By Shristi Achar A and Amruta Khandekar

(Reuters) -Futures tracking Wall Street's indexes were largely subdued on Friday as investors were on edge in the run up to Federal Reserve Chair Jerome Powell's comments that are expected to hold clues on the interest rate path.

This comes after the S&P 500 and Nasdaq finished November with their biggest monthly gain since July 2022, while the Dow Jones rallied to close at its highest level since January 2022.

Data showing slowing U.S. consumer spending, dovish comments from some Fed officials and a strong earnings season led the equity indexes to have a stellar November.

The recent slew of economic data, including Thursday's personal consumption expenditure index, signalled easing inflation in the world's largest economy, underscoring hopes the central bank would now end its interest rates hiking cycle.

Not only a pause in rate hikes has been fully priced in for the upcoming December policy meeting, traders also see an about 48% chance of at least a 25 basis point rate cut in March 2024 and an about 77% chance in May, according to CME Group's FedWatch tool.

"Data yesterday adds weight to the interest-rate cutting narrative, but does throw up another challenge," said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown in a note.
 

"Lower interest rates are introduced in times of economic challenges, and the size and shape of an incoming recession – should there be one – does have the ability to derail gains."

Market participants now await policy comments from Powell at two separate discussions scheduled for 11 a.m. ET and 2 p.m. ET. After recent conflicting remarks from other policymakers, investors are concerned that Powell could push back against the rate cut narrative.

Other officials, including Fed Governors Lisa Cook and Chicago Fed President Austan Goolsbee are also scheduled to speak during the day.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 27, 2023. REUTERS/Brendan McDermid/File Photo

Among others, different sets of manufacturing purchasing managers' index (PMI) data from the S&P Global and ISM, scheduled for release after the opening bell, are also in focus.

Tesla underperformed other megacap stocks, down 1.5% before the bell, as the EV maker priced its Cybertruck above its initial forecast.

At 7:00 a.m. ET, Dow e-minis were up 47 points, or 0.13%, S&P 500 e-minis were down 1 points, or 0.02%, and Nasdaq 100 e-minis were down 25 points, or 0.16%.

Among other stocks, U.S.-listed shares of Alibaba slipped 1.4% premarket after Morgan Stanley downgraded the e-commerce giant, citing slower turnaround in customer management revenue (CMR).

Pfizer fell 3.2% as the drugmaker scrapped its plan to advance a twice-daily version of oral weight-loss drug danuglipron into late-stage studies.

Marvell Technology shed 5.3% after the chipmaker's fourth-quarter revenue forecast fell short of Street estimates.

Ulta Beauty rose 10.9% after the cosmetics retailer raised the lower end of its annual net sales forecast and named Paula Oyibo its new chief financial officer.

Automation software firm UiPath jumped 14% on beating third-quarter revenue estimates.

(Reporting by Shristi Achar A and Amruta Khandekar in Bengaluru; Editing by Shinjini Ganguli)

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