Main US stock index futures took a breather on Sunday from a recent rally sparked by increased expectations for a September interest rate cut by the Federal Reserve following remarks from Fed Chair Jerome Powell.
S&P 500 futures expiring in September dropped 0.11% to 5,646.50 points, while Nasdaq 100 futures were trading 0.10% lower at 19,770.25 points. Dow Jones futures fell 0.08% to 41,239.00 points.
Investors are approaching the stock markets cautiously ahead of this week’s critical cues from the earnings of US semiconductor giant Nvidia Corp. and the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation.
Santa Clara, California-based Nvidia is set to publish its second-quarter earnings on Wednesday. The report is expected to show the current condition of the chipmaker’s earnings growth rate, which has been ramped up by an artificial intelligence (AI) boom.
Its earnings and forecast for the three months ending July are also awaited for further hints on AI demand following mixed earnings results from other major tech firms cast doubts over the validity of an AI-driven rally in 2023.
US tech leaders Alphabet Inc. and Microsoft Corp. saw their respective shares slide after reporting their second-quarter earnings.
Investors will assess the impact of the massive interest in AI on Wednesday. Second-quarter earnings from chip giants Taiwan Semiconductor Manufacturing (TSMC) Co. Ltd. and ASML Holding NV have signaled semiconductors companies’ continued reception of an AI-fueled demand boost.
More Fed Rate Cut Cues Due with Upcoming PCE Price Index
Market players also await Friday’s release of the US PCE inflation data for July for additional cues on the Fed’s plans for interest rates.
Prospects of an interest rate cut in September were reinforced last week after Powell said the upside risks of inflation have declined while the downside risks to employment have risen.
The Fed Chair provided no hints on the timing or size of rate reductions ahead, but he stated that it is now time to adjust their monetary policy. The timing and pace will depend on upcoming economic data, outlook, and the risk balance, according to Powell.
Powell’s comments followed minutes of the central bank’s July meeting, during which most officials approved a rate reduction due to cooling inflation.
The Fed left the benchmark interest rates unchanged at 5.25%-5.50%, although it kept the option of trimming them at its meeting next month on the table.
The PCE price index is expected to impact the extent of the September cut, which the CME FedWatch tool showed split bets for 25 and 50 basis points (bps).
