Investors Take a Cautious Stance Ahead of Key Economic Data
As the US stock market prepares for a pivotal week, investors are adopting a wait-and-see approach, hesitant to make bold moves until they receive clearer signals on the economy’s health and the likelihood of further interest rate cuts. Despite the S&P 500 and Dow Jones Industrial Average reaching record highs for the second consecutive day, concerns about the labor market’s resilience are simmering beneath the surface.
The Federal Reserve’s surprise 50-basis-point rate cut last week has sparked debate about the pace of economic growth, with some analysts wondering if the central bank’s move was a response to a sharper-than-expected slowdown. As a result, expectations for another 50-basis-point cut at the November meeting have surged to 58.2%, according to the CME Group’s FedWatch Tool.
Meanwhile, traders anticipate borrowing costs will decline by nearly 79 basis points before the year’s end, based on LSEG data. As of 5:49 a.m. ET, Dow E-minis were down 37 points, or 0.09%, while S&P 500 E-minis fell 9.25 points, or 0.16%, and Nasdaq 100 E-minis dropped 63.5 points, or 0.31%.
The market’s optimism has been fueled by hopes of interest rate cuts and the potential for artificial intelligence to boost corporate profits. However, with valuations already elevated above long-term averages, analysts predict further upside momentum for stocks will be limited.
Today, investors will be eyeing data on new home sales for August, due at 10:00 a.m. ET. The real test, however, will come later in the week with the release of weekly jobless claims and personal consumption expenditure data for August. Remarks from Federal Reserve Governor Adriana Kugler, scheduled for after markets close, will also be closely watched.
All eyes will be on Fed Chair Jerome Powell’s speech at the New York Treasury Market Conference on Thursday, which could provide valuable insights into the central bank’s thinking. In premarket trading, KB Home fell 7.1% after missing Wall Street expectations for third-quarter profit, while Tyson Foods lost 1.4% following a downgrade by Piper Sandler. Hewlett Packard Enterprise, on the other hand, rose 2.4% after Barclays upgraded its rating to “overweight”. US-listed shares of Chinese companies, which surged yesterday, retreated, with some analysts questioning the immediate impact of China’s massive stimulus package on domestic demand.
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