WALL Street’s main indexes were on course for a weak open on Monday as shares of chipmakers and other megacap growth companies declined, while traders awaited a widely expected pause in interest rate hikes by the Federal Reserve this week.
A rise in U.S. Treasury yields on uncertainty around interest-rate trajectory through the year-end pressured major growth names including Microsoft, Meta Platforms and Alphabet, driving them down between 0.1% and 0.3% in premarket trading.
Chip stocks Nvidia Corp, Broadcom, Lam Research, Qualcomm and Marvel Technology fell between 0.4% and 1.9%.
UK-based chip designer Arm Holdings, which had a stellar debuted on Thursday, dropped 4% after Bernstein started covering the stock with an “underperform” rating
A slump in chipmakers on concerns over weak demand and a slide in mega cap growth stocks had driven the S&P 500, the Nasdaq and the Dow to their worst single-day fall on Friday since Aug. 24, with the indexes losing between 0.8% and 1.5%.
A slew of recent hotter-than-expected economic data has eased concerns about a potential recession, without raising fears of a September rate hike.
A jump in energy prices, however, threatens to keep inflation elevated with crude oil firming on Monday.
“Oil prices have entered into the narrative now and the Fed will consider this,” said Peter Andersen, founder of Andersen Capital Management.
“There will be a pause in September as indicated by the futures market. It is very important that we watch the upcoming CPI numbers and the employment numbers because they could have a strong impact on the way the Fed will wrap up the year.”
Traders largely expect the Fed to keep rates unchanged at 5.25% to 5.5% during its meeting on Wednesday, while their odds for another pause in November stand at 69%, according to the CME FedWatch Tool.
Goldman Sachs, much like other big investors such as J.P. Morgan Asset Management and Janus Henderson Investors, anticipates the central bank to lift its economic growth projections this week. It also expects rates to have peaked.
The Bank of England and the Bank of Japan will also make their monetary policy decisions this week.
At 8:30 a.m. ET, Dow e-minis were down 3 points, or 0.01%, S&P 500 e-minis were down 5.5 points, or 0.12%, and Nasdaq 100 e-minis were down 37.5 points, or 0.24%.
Bucking the trend among its peers, chipmaker Micron Technology rose 1.7% in premarket trading, following Friday’s rout, after Deutsche Bank upgraded its rating on the stock to “buy” from “hold”.
Asset management firm Blackstone Inc and vacation rentals platform Airbnb, which are set to join the S&P 500 before the bell on Monday, were down 0.1% and 0.5%, respectively.
L3Harris Technologies rose 0.9% after Wells Fargo upgraded the aerospace and defense firm to “overweight” from “equal-weight”. – Reuters