LDN - Business

Futures dip as rate-cut hopes ebb

[April 11, 2024] By Shashwat Chauhan and Shristi Achar A

(Reuters) -U.S. stock index futures slipped on Thursday as Treasury yields remained elevated a day after a hot inflation reading triggered a bruising Wall Street sell-off, diminishing hopes of a June rate cut by the Federal Reserve.

Wall Street sold off sharply in the last session after data showed U.S. consumer prices increased more than expected in March, leading financial markets to deduce that the central bank might delay cutting interest rates until September this year.

Further fueling concerns, minutes of the central bank's March meeting showed officials were worried progress on inflation could have stalled and a longer period of tight monetary policy might be needed to tame the pace of price increases.

"The unexpectedly strong expansion in underlying inflation so far this year has been disappointing. This is likely to lead the Fed to raise the bar regarding the evidence it wants to see before easing policy this year," strategists at TD Securities said in a note.

Several brokerages have shifted their rate-cut outlooks, with UBS Global Wealth Management now expecting the Fed to start cutting interest rates in September, compared to June earlier, while BNP Paribas anticipates the first cut in July.

Traders currently see a 41% chance of the first rate cut in July, according to the CME's FedWatch Tool.

Yields across government bonds remained elevated after Wednesday's spike, with the 10-year note last at 4.5579%, hovering near its highest level since November.

The focus now shifts to the March reading of producer prices, along with weekly jobless claims data, both due at 8:30 a.m. ET, to gauge the strength of the world's biggest economy.

Traders pared back enthusiasm for monetary policy easing this year, with bets now showing only about 40 basis points of cuts expected in 2024, according to LSEG data. This is down from about 150 bps seen at the start of the year.

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The Nasdaq Market site is seen on the day that shares of Truth Social and Trump Media & Technology Group start trading under the ticker "DJT", outside the Nasdaq Market site in New York City, U.S., March 26, 2024. REUTERS/Brendan McDermid

Investors will also watch for comments from New York Fed President John Williams, Richmond Fed President Thomas Barkin and Atlanta Fed President Raphael Bostic for hints on the central bank's rate trajectory.

The first-quarter earnings season will pick up pace on Friday, when a trio of big banks - JPMorgan Chase & Co, Citigroup and Wells Fargo - is slated to post quarterly results.

At 7:10 a.m. ET, Dow e-minis were down 107 points, or 0.28%, S&P 500 e-minis were down 14.5 points, or 0.28%, and Nasdaq 100 e-minis were down 35.25 points, or 0.19%.

Biotech firm Alpine Immune Sciences is set to be acquired by Vertex Pharmaceuticals for about $4.9 billion in cash, both companies said. Alpine surged 36.4% in premarket trading.

Clothing rental subscription service Rent the Runway jumped 32.8% after a positive full-year forecast.

Albemarle gained 1.4% after Berenberg upgraded the lithium miner's rating to "buy" from "hold".

CarMax shed 6.2% after the pre-owned vehicle retailer posted a nearly 27% drop in fourth-quarter profit, hurt by decreased profitability from units sold.

(Reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by Pooja Desai)

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