U.S. stock index futures experienced a rise on Monday, driven by the latest inflation data which showed a moderation in consumer prices. This development has increased the anticipation of an impending interest rate cut by the Federal Reserve.
The Commerce Department's report from Friday indicated that the personal consumption expenditures (PCE) price index, a preferred measure of inflation by the Fed, saw a 0.3% increase in February. This was below the anticipated 0.4% rise forecasted by economists. This data has led to a heightened expectation of rate cuts, with the money markets now pricing in a 66% likelihood of at least a 25 basis point reduction in June, a notable increase from 55% prior to the data release, as per CME Group's FedWatch tool.
Fed Chair Jerome Powell's comments further fueled optimism, stating he expects future interest rates to be lower than current levels, albeit likely remaining above pandemic-era levels. Citigroup analysts predict that, depending on economic activities and labor market conditions, the Fed could announce up to five rate cuts this year.
Despite these prospects, market participants are anticipating the Federal Reserve to maintain current rates at the forthcoming policy meeting in May. Growth stocks, however, are already reacting positively to the news, with notable increases in premarket trading for Microsoft, Nvidia, and Tesla, ranging between 0.6% and 1.1%.
This positive momentum suggests a robust start to the second quarter, following a significant 10.16% rise in the S&P 500 during the first quarter, marking its largest gain since 2019. The Dow Jones Industrial Average is also on the brink of surpassing the 40,000 level for the first time, fueled by optimism around artificial intelligence, strong earnings, and hopes for a soft landing of the economy.
Additional data points such as the S&P Global's final manufacturing PMI and the ISM manufacturing PMI reports are expected to be released, offering further insights into the economic landscape.
Early trading movements also saw AT&T experiencing a 1.6% drop after announcing an investigation into a potential data leak affecting nearly 73 million accounts. Conversely, Spirit Airlines saw a 2.1% increase following news of receiving monthly credits from International Aero Engines through the end of 2024 for operational disruptions caused by engine issues.
