Wall Street futures down on rates rethink, geopolitical risks
Cboe Volatility index hits four-week high
Starboard Value takes $1 bln stake in Pfizer, shares up
Futures down: Dow 0.46%, S&P 500 0.53%, Nasdaq 0.67%
For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window; Updated at 0700 ET
By Lisa Pauline Mattackal and Pranav Kashyap
Oct 7 (Reuters) -U.S. stock index futures dipped on Monday as investors recalibrated their expectations for Federal Reserve rate cuts this year, while also exercising caution amid heightened geopolitical tensions and ahead of key inflation data, policymaker comments, and third-quarter earnings.
Investors are pricing in an over 85% chance of a 25 basis point rate cut at the Fed meeting in November, according to the CME's FedWatch tool. Just a week ago, markets were hopeful of a second, outsized 50 basis point reduction.
However, a bumper September non-farm payrolls report last Friday showed the economy unexpectedly added the most number of jobs in six months, pointing to a still-robust jobs market.
The Cboe Volatility index .VIX, Wall Street's fear gauge, rose to 21.17, at its highest level in four weeks.
Meanwhile, U.S. Treasury yields rallied, with the yield on benchmark 10-year notes US10YT=RR crossing 4% for the first time in two months.
"USD and Treasury yields are consolidating near multi-week highs triggered by Friday's outstanding U.S. September jobs report," said analysts at Brown Brothers Harriman.
Markets will continue to "wax and wane" with a focus on U.S. economic outperformance, military tension in the Middle East, and risk-on dynamics, the analysts added.
The rise in yields pressured rate-sensitive megacap growth stocks, pulling down Nvidia NVDA.O 0.8%, Alphabet GOOGL.O 0.5% and Microsoft MSFT.O 0.3% in premarket trading.
Apple AAPL.O fell 1.2% after Jefferies assumed coverage of the stock with a "hold" rating.
Among other movers, shares of Pfizer PFE.N rose 3.3% after a report that activist investor Starboard Value has taken a roughly $1 billion stake in the drug giant.
At 07:00 a.m. ET, U.S. S&P 500 E-minis EScv1 were down 30.75 points, or 0.53%, Nasdaq 100 E-minis NQcv1 were down 136.5 points, or 0.67%, and Dow E-minis 1YMcv1 were down 193 points, or 0.46%.
Futures for the small-cap Russell 2000 index RTYcv1 were also down 0.68%.
While markets continue to fine tune its expectations for interest rate cuts, most market watchers remain optimistic about the underlying strength of the economy and outlook for equities.
Goldman Sachs raised its 2024 year-end S&P 500 .SPX target to 6,000 from 5,600, and also lowered its odds of a U.S. economic recession to 15% from 20%.
Escalating geopolitical tension in the Middle East was on the investors' radar. Hezbollah rockets hit Israel's third-largest city of Haifa early on Monday, in the first direct attack on the northern city.
The benchmark S&P index closed Friday just above 5,751, while the Dow Jones Industrial Index .DJI notched a record closing high after the jobs report.
The consumer price index data, this week's most closely watched data event, is due on Thursday.
Several Fed officials are also slated to speak this week, with comments expected from Michelle Bowman, Neel Kashkari, Raphael Bostic and Alberto Musalem later on Monday.
Third-quarter earnings for S&P 500 companies also begin this week, with major banks including JP Morgan Chase JPM.N, Wells Fargo WFC.N and BlackRock BLK.N scheduled on Oct. 11.
Earnings will be a significant test for Wall Street's rally this year - the S&P 500 is up about 20% year-to-date and stands near record highs.
Reporting by Lisa Mattackal and Pranav Kashyap in Bengaluru; Editing by Shinjini Ganguli
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
