LDN - Business

Futures gain steam after Wall Street's slide; rate-cut jitters loom

[February 14, 2024] By Johann M Cherian and Ankika Biswas

(Reuters) -U.S. stock index futures recovered some lost ground on Wednesday after a sharp Wall Street sell-off in the previous session as a hot inflation report further clouded the timing for the Federal Reserve's first interest rate cut this year.

Rate-sensitive megacaps like Alphabet <GOOGL.O>, Microsoft, Meta Platforms and chip stocks like Nvidia and Advanced Micro Devices rebounded, up around 1% each in premarket trading, as yields on U.S. Treasury notes - an indicator for rate expectations - eased slightly from over two-month highs.

Wall Street's main indexes slumped to over one-week lows on Tuesday, with the blue-chip Dow marking its worst day in 11 months, as data showed core consumer prices in January stayed at nearly double the Fed's 2% target, forcing investors to reassess expectations for a rate cut in the first half of 2024.

"The data goes against the current market base case of a Goldilocks scenario where growth remains robust, but inflation keep trending lower ... the rise in super core would support the recent central bank narrative of a pushback against early rate cuts," said Mohit Kumar, Jefferies' chief economist, Europe.

"We have been in the camp of later and lesser from central banks."

Euphoria around an early start to monetary policy easing had fueled a Wall Street rally since November, paving the way for a bull market for the S&P 500 this year. However, policymakers might have to wait a bit longer for more evidence of easing price pressures in the face of a resilient U.S. economy.

Still, Treasury Secretary Janet Yellen acknowledged that Tuesday's data showed progress in the fight against inflation.

Bets for an at least 25-basis-point rate reduction in May stand at 37%, down from 63% earlier in the week, while expectations for June stand at 76%, the CME FedWatch tool showed.

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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 1, 2024. REUTERS/Brendan McDermid/File Photo

Markets will be keen on what the first batch of central bankers have to say on the monetary policy outlook after Tuesday's data. Remarks from Chicago Fed President Austan Goolsbee and Vice Chair for Supervision Michael Barr are expected through the day.

At 7:12 a.m. ET, Dow e-minis were up 108 points, or 0.28%, S&P 500 e-minis were up 25.75 points, or 0.52%, and Nasdaq 100 e-minis were up 125 points, or 0.71%.

Among early movers, Lyft surged 19.9% after the ride-hailing platform beat estimates for quarterly profit and said it would generate positive free cash flow for the first time in 2024.

Rival Uber, too, gained 5.6%, further boosted by a $7-billion share buyback plan.

Robinhood Markets jumped 14.4% following a surprise fourth-quarter profit, while Kraft Heinz lost 1.4% after missing fourth-quarter sales expectations.

Intuitive Machines fell 8.9% after the aerospace firm's planned launch of a robotic moon lander was postponed for at least a day, less than two hours before liftoff time on Wednesday.

AI-driven lending platform Upstart dropped 13.9% on a downbeat first-quarter revenue forecast.

Crypto stocks like Coinbase, Marathon Digital and Riot surged between 4% and 9.3% as bitcoin's <BTC=> market value crossed $1 trillion for the first time since Nov. 21.

(Reporting by Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Maju Samuel)

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