U.S. Stock Futures Hold Steady Amid Key Market Events
June 14, 2024 — U.S. stock futures edged slightly above the flatline on Wednesday morning, as investors exercised caution ahead of a day filled with potentially market-moving events. The Federal Reserve is set to release its latest forecast for interest rates for the rest of 2024 and beyond, with these predictions likely to be influenced by a crucial May inflation reading.
Futures Muted
U.S. stock futures were broadly muted on Wednesday as investors braced for significant developments from the Federal Reserve and new inflation data. On Tuesday, the benchmark S&P 500 and the tech-heavy Nasdaq Composite closed at record highs for a second consecutive session, driven in part by a surge in Apple shares. The tech giant’s unveiling of new AI-enhanced features at its annual developers conference earlier this week bolstered demand for its devices.
As attention shifts to the conclusion of the Federal Reserve’s two-day policy meeting, the release of May’s consumer price index (CPI)—a critical gauge of U.S. inflation—prior to the market opening is anticipated to be a pivotal moment.
Fed Decision Ahead
Federal Reserve officials are widely expected to maintain interest rates at a more than two-decade high of 5.25% to 5.5% on Wednesday, making the central bank’s future borrowing cost outlook the focal point. Policymakers are set to unveil their latest “dot plot,” showcasing their rate path predictions for the rest of 2024 and beyond. Fed Chair Jerome Powell is also scheduled to make a statement.
In March, the dot plot indicated most officials anticipated two or three rate cuts this year. However, recent statements from several Fed members suggest they are in no hurry to reduce rates, preferring to see more concrete evidence that inflation is steadily moving towards their 2% target. According to CME Group’s closely monitored FedWatch Tool, the probability of a rate cut in September has decreased following a stronger-than-expected jobs report last Friday, which heightened concerns about persistent inflation.
CPI Looms Large
The Labor Department’s latest consumer price index, scheduled for release about thirty minutes before the Fed reconvenes for the second day of its policy meeting, could significantly impact the central bank’s projections. Economists predict that annualized headline price growth in May will match the previous month’s pace but slow on a monthly basis. The “core” CPI, which excludes volatile items like food and fuel, is expected to decelerate slightly year-over-year and remain steady month-on-month.
A higher-than-expected CPI reading could lead Fed officials to temper their expectations for rate reductions in 2024, while a softer report might prompt more policymakers to project up to two cuts. Analysts cited by the Wall Street Journal suggest that a median forecast of at least two cuts would support hopes for a reduction by September, while a median of only one cut would likely delay any reduction until later in the year.
Chinese Consumer Price Inflation Weaker Than Expected
In other economic news, Chinese consumer prices grew less than anticipated in May, with consumption remaining sluggish amid an uncertain economic recovery. Producer prices, however, showed signs of a possible rebound in the industrial sector. China’s consumer price index rose 0.3% year-on-year in May, falling short of expectations for a 0.4% rise and unchanged from the prior month. The producer price index shrank by 1.4% year-on-year, a slower decline than projected.
Crude Prices Rise
Crude prices climbed on Wednesday, buoyed by optimistic views on global demand. By early morning, U.S. crude futures (WTI) were up 0.8% at $78.52 per barrel, while Brent crude rose 0.6% to $82.41 a barrel. Data from the American Petroleum Institute showed a larger-than-expected decrease in U.S. oil inventories last week, raising hopes for increased fuel consumption during the travel-heavy summer season. Additionally, the U.S. Energy Information Administration raised its 2024 world oil demand growth forecast, and the Organization of the Petroleum Exporting Countries maintained its strong demand growth outlook.
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