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Both the S&P 500 and the Nasdaq Composite posted losses of at
least 3% each on Monday after weak economic data raised worries
of a U.S. recession and the unwinding of sharp positions of
carry trades that fund high-yielding assets.
U.S. central bank policymakers pushed back on Monday against the
notion that weaker-than-expected July jobs data means the
economy is in recessionary freefall, but also warned that the
Federal Reserve will need to cut rates to avoid such an outcome.
"Our view remains that household and corporate balance sheets'
strength implies recession is unlikely, but risks are building.
If economic data continues to deteriorate, the Fed stands in a
good position to respond aggressively," said Seema Shah, chief
global strategist at Principal Asset Management.
Traders currently see a 75% chance of a 50-basis-point cut in
Fed interest rates in September, down from 98% on Monday and
expect the year-end rates at 4.25%-4.50%, according to CME's
FedWatch Tool.
Top brokerages including J.P. Morgan, Citigroup and Wells Fargo
have forecast a 50-basis-point interest rate cut by the U.S.
central bank in September after a surprisingly weak U.S.
employment report for July.
A closely watched gap between the two- and 10-year benchmark
yields turned positive on Monday, usually indicating the economy
is heading into a downturn.
The CBOE Volatility index, also known as Wall Street's "fear
gauge", was at 33.15 points after hitting a high of 65.73 on
Monday.
At 5:16 a.m. ET, Dow E-minis were up 85 points, or 0.22%, S&P
500 E-minis were up 19.5 points, or 0.37% and Nasdaq 100 E-minis
were up 59.75 points, or 0.33%.
Among other movers, Palantir Technologies surged 7.5% after
software services provider raised its annual revenue and profit
forecast for the second time this year.
CrowdStrike rose 2.9% after brokerage Piper Sandler raised its
rating to "overweight" from "neutral".
(Reporting by Shubham Batra in Bengaluru; Editing by Saumyadeb
Chakrabarty)
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