Futures slip as rate-cut uncertainty looms; Tesla drops

[January 17, 2024]  (Reuters) - U.S. stock index futures declined on Wednesday, with Tesla among the top losers, while investor focus remained on corporate earnings and the recent pushback from policymakers on expectations for an early start to interest-rate cuts.

Tesla dropped 1.5% in premarket trading after the electric-vehicle maker slashed the prices of its Model Y cars in Germany, a week after the carmaker reduced prices for some China models.

Halfway into the first month of 2024, Wall Street's over-13% rally in the last two months of 2023 is losing steam as U.S. central bankers continue to downplay market expectations for a quick start to the monetary-policy-easing cycle, while data on the economy's performance appears mixed.

The global risk appetite is also glum. Dutch central bank chief Klaas Knot told CNBC that investor bets for European Central Bank rate cuts are excessive and possibly self-defeating. [MKTS/GLOB]

Still, traders continue to pin their hopes on a 61% probability that the U.S. Federal Reserve will cut rates by 25 basis points (bps) in March, down from over 80% at the end of 2023, according to the CME Group's FedWatch Tool.

The CBOE Market Volatility Index, a market fear gauge, rose to an over two-month high, at 14.60 points.

On tap today is the December retail sales data. Economists polled by Reuters expect a 0.4% rise, compared with a 0.3% advance in the month before.
 

"Improving consumer demand may translate not only into healthier economic growth, but into concerns about stickier inflation in the months to come," said Charalampos Pissouros, senior investment analyst at XM.

A separate report on December industrial production due in the day is forecast to show a flat reading, from 0.2% growth in November.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 9, 2024. REUTERS/Brendan McDermid

A number of Fed officials are also expected to speak on Wednesday, including Fed Vice Chair for Supervision Michael Barr, Fed Board Governor Michelle Bowman and New York Fed President John Williams. Their remarks will be parsed for clues on the timing of rate cuts.

On the quarterly earnings front, reports from Charles Schwab, Citizens Financial and US Bancorp are expected.

CEOs of investment banking giants expressed optimism about a resurgence in capital markets when they reported fourth-quarter earnings on Tuesday, on an improving U.S. economy and deals pipeline, but also warned of risks that could disrupt the nascent recovery.

At 5:35 a.m. ET, Dow e-minis were down 161 points, or 0.43%, S&P 500 e-minis were down 22.5 points, or 0.47%, and Nasdaq 100 e-minis were down 97 points, or 0.57%.

Among other movers, U.S.-listed shares of Chinese firms such as Alibaba, Xpeng and Bilibili dropped between 3.3% and 7.3%, after China data showed the local economy's recovery appeared shakier than many analysts and investors expected.

Spirit Airlines slid 7.8% following a plunge in the previous session, after a U.S. judge blocked JetBlue from acquiring the carrier.

Interactive Brokers fell 4.6% after posting downbeat fourth-quarter revenue.

(Reporting by Johann M Cherian in Bengaluru; Editing by Pooja Desai)

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