U.S. Stock Futures Dip as Investors Eye Fed Decision and Inflation Data
U.S. stock futures pointed lower on Monday, with investors bracing for a major Federal Reserve interest rate decision and key monthly inflation data later in the week. After a choppy trading session, Wall Street’s main averages fell, weighed down by a stronger-than-expected jobs report that fueled concerns the Fed might delay potential rate cuts longer than anticipated. Despite this, the benchmark S&P 500, tech-heavy Nasdaq Composite, and 30-stock Dow Jones Industrial Average managed to post weekly gains.
Fed Decision This Week
All eyes are on the Federal Reserve this week as markets widely expect the Fed to keep borrowing costs at more than two-decade highs following its policy meeting on Wednesday. The focus will be on any signals the Fed gives regarding its future rate outlook. The updated dot plot, a closely watched gauge of policymakers’ rate expectations, is expected to show officials predicting two 25-basis point cuts this year, down from three in March.
Several Fed officials have recently emphasized the need for more evidence that inflation is cooling sustainably toward their 2% target before beginning to cut rates. While price gains have eased following aggressive rate hikes that started in 2022, they remain above the 2% goal.
May Inflation Data Due This Week
Fresh U.S. inflation figures are set to be released just hours before the Fed’s decision on Wednesday. Economists predict that annualized headline price growth in May will match the previous month’s pace but slow on a monthly basis. The core reading, which excludes volatile items like food and fuel, is expected to decelerate slightly year-on-year and stay in line with April’s rate month-on-month.
These inflation numbers will be closely monitored by Wall Street, as they could provide insights into the Fed’s policy path later this year. According to CME Group’s FedWatch Tool, there is now a roughly 53% chance the Fed will lower rates from their current level of 5.25% to 5.5% as soon as September.
Elliott Takes Almost $2 Billion Stake in Southwest Airlines
Elliott Investment Management has acquired nearly $2 billion in Southwest Airlines, aiming to push for changes to reverse the carrier’s underperformance, according to a Wall Street Journal report on Sunday. This move makes Elliott one of Southwest’s largest shareholders.
The report comes as Southwest’s shares have fallen nearly 4% in 2024 and remain below their March 2020 levels when the COVID-19 pandemic hit the airline industry hard. Southwest, once known for 47 consecutive years of profits, has faced higher costs from new labor contracts and delivery delays from Boeing
Crude Inches Higher
Crude prices rose on Monday, steadying after three consecutive weeks of losses ahead of monthly reports from OPEC and the IEA, as well as the latest Federal Reserve meeting. By 03:36 ET, U.S. crude futures (WTI) traded 0.3% higher at $75.77 per barrel, while Brent crude climbed 0.4% to $79.91 per barrel.
The Organization of the Petroleum Exporting Countries is set to release its monthly report on Tuesday, with the oil group’s outlook on annual crude demand likely in focus. A monthly report from the International Energy Agency is also due later this week. Last week, the crude market saw its third straight weekly loss due to concerns over OPEC+ plans to unwind production cuts, potentially adding to rising global supply.
Stay tuned for more updates as we navigate a pivotal week for markets, with significant economic data and policy decisions on the horizon.
$SPY/SPX- Last week the main watch was whether buyers can show a continuation move of Friday’s afternoon rally. Despite the late week break lower, price continues to trade within the prior range. The main focus this week is the reaction versus the 5275 level, which continues to serve as a key pivot. Holding above 5275 would show acceptance of Friday’s rally, and price would target 5310, 5335, 5370, and 5400.” Price defended the 5275 level, marking a fresh all-time high later in the week with a weekly high at 5385.
For now, price continues to oscillate near the prior all-time high at 5368.25, which will be the main watch for this week. If buyers can continue to show acceptance above the 5368.25 level, price would target the 5400 psychological level, with likely continuation into 5435 and 5470.
If sellers hold price below 5368.25, that would mean the Thursday and Friday look above was a failed breakout, and price would target 5333, 5310, 5285, and 5250. Of note, FOMC is this week so volatility is expected in the back-half of the week.
Upside levels of interest: 5368.25, 5400, 5435, 5470
Downside levels of interest: 5333, 5310, 5285, 5250
Notable Economic Data
- Monday: 3Y Auction
- Tuesday: 10Y Auction
- Wednesday: CPI, FOMC
- Thursday: PPI, 30Y Auction
- Friday: Michigan Consumer Sentiment
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