As investors grapple with conflicting data, U.S. stock index futures edged lower on Monday. Last week’s Nonfarm Payrolls data exceeded expectations, yet the unemployment rate rose and household surveys indicated weakness. This conflicting data led to indexes closing slightly lower on Friday.
Following the release of the strong data, expectations for interest-rate cuts by the Federal Reserve in September have been dialed back. The chances of a rate cut are now less than 50%, compared to the 69% probability the previous week. Interest-rate traders have also adjusted their expectations for the amount of easing this year, now only pricing in one cut versus the previous two.
Despite the uncertainty surrounding interest rates, all three major indexes saw gains last week. The Nasdaq rose by 2.38%, the S&P 500 gained 1.32%, and the Dow added 0.29%. The information technology sector led the weekly gains with a nearly 4% increase, driven by companies like chipmaker Nvidia, which is considered a strong bet on artificial intelligence.
Investors are now turning their attention to a busy week ahead. The Consumer Price Index (CPI) inflation data for May and the conclusion of the Fed’s two-day policy meeting are scheduled for Wednesday. While the central bank is expected to keep rates steady, investors will be looking for clues in updated economic and policy projections.
Analysts at ING anticipate that the Fed will adjust their projections for rate cuts in light of recent data. They predict that the central bank will now project two cuts in 2024 and four in 2025, instead of the previous three and three. J.P. Morgan also revised their expectations, now forecasting the first rate cut to occur in November rather than July.
In addition to the CPI data and Fed meeting, other important releases scheduled later in the week include the Producer Price Index, import and export prices, and the University of Michigan’s consumer sentiment survey. Nvidia’s shares slipped in premarket trading following a stock split, while companies like CrowdStrike, KKR & Co, and GoDaddy saw gains after being included in the S&P as of June 24.
Overall, the market is navigating through uncertain times as investors await key data releases and policy decisions. It remains to be seen how the market will react to the upcoming events and whether the trends of the past week will continue in the days ahead.