Wall Street set for higher open as rate cut hopes linger
Wall Street set for higher open as rate cut hopes linger

Wall Street set for higher open as rate-cut hopes linger

WALL Street was poised for a higher open on Monday as traders priced in a greater chance of the Federal Reserve cutting interest rates this year following a soft payrolls data last week.

The benchmark S&P 500 and the blue-chip Dow closed at three-week highs on Friday after data showed U.S. job growth slowed more than expected in April, taking pressure off the U.S. central bank to keep rates higher for longer.

Traders are currently pricing in rate cuts worth 48 basis points from the Fed by the end of 2024, with the first cut expected in September or November, according to LSEG’s rate probability app. In recent weeks, traders had priced in just one cut due to signs of sticky inflation.

“It’s been this tug of war between what you’re seeing play out in the rates market and the repricing of inflation and Fed policy versus what you’re seeing on the earnings front,” said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions.

“In our opinion, it’s been a pretty even battle so far.”

U.S. stock indexes appear to have stabilized after a rocky April, as a much better-than-expected first-quarter earnings season and hopes of U.S. monetary policy easing draw buyers back into the market.

The Fed left interest rates unchanged last week and signaled it was leaning toward eventual reductions in borrowing costs, but repeated that it wants to gain “greater confidence” that inflation will continue to fall before cutting rates.

Richmond Fed President Thomas Barkin and his New York counterpart John Williams are scheduled to speak later in the day, kicking off speeches from a host of U.S. central bank policymakers this week.

Key data releases this week include weekly jobless claims and U.S. consumer sentiment data for May.

With the earnings season in full swing, investors will also keep an eye on quarterly numbers from major firms including Walt Disney, Uber and Arm Holdings this week.

Of the 397 firms in the S&P 500 that have reported earnings through Friday, 76.8% beat analysts’ profit estimates, compared with the long-term average of 66.7%, as per LSEG data.

At 08:26 a.m. ET, S&P 500 e-minis were up 21.5 points, or 0.42%. Nasdaq 100 e-minis climbed 64.25 points, or 0.36% while Dow e-minis rose 148 points, or 0.38%.

Apple dipped 0.3% premarket after the value of Berkshire’s stake in the iPhone maker fell 22% to $135.4 billion as of March 31, from $174.3 billion at the end of 2023.

Paramount Global added 3.6% after the media company ended its exclusive negotiations with Skydance Media without a deal, allowing the special committee to entertain other offers from rival bidders.

Perficient jumped 53.2% after Swedish private equity firm EQT AB said it would take the U.S.-based digital consultancy firm private in an all-cash deal valued at about $3 billion.

Tyson Foods rose 2.4% after the meatpacker surpassed Wall Street expectations for second-quarter profit as it begins to reap the benefits of shutting some chicken processing plants to reduce costs. – Reuters

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