Inflation Data in Focus as Markets Anticipate Fed Rate Cuts

As futures for major US indexes rose on Monday, investors eagerly anticipated crucial inflation figures this week to determine the likely timing of future interest rate cuts by the Federal Reserve. Following three consecutive weeks of gains in both the S&P 500 and Nasdaq Composite indices, the Dow recorded its largest weekly surge since mid-December. The bullish mood was attributed to better-than-expected corporate results and indications of a subsiding US labour market, sparking speculation of possible rate reductions by the Federal Reserve during the course of this year. This week, traders will monitor a variety of economic statistics, including monthly producer and consumer price indices, retail sales, and weekly jobless claims. According to projections made by economists participating in a Reuters survey, core consumer prices are expected to increase by 0.3% on a monthly basis and by 3.6% annually in April. Ronald Temple, Chief Market Strategist at Lazard, commented that attention would primarily focus on service inflation excluding housing costs and energy services, following core CPI’s 36-basis-point uptick in March. Although Federal Reserve authorities have recently assured the public that the impending change will not result in an increase in interest rates, the exact date of the inaugural rate decrease remains unclear. On Monday, Cleveland Fed President Loretta Mester was scheduled to deliver an address. Traders currently anticipate a total reduction of 42 basis points from the Federal Reserve by the end of 2024, with a 49% chance of a September rate cut, according to data gathered by LSEG’s rate probabilities app. Significant corporations scheduled to disclose their financial outcomes this week include Home Depot, Walmart, Cisco, and Alibaba. Out of the 459 businesses listed on the S&P 500 that had already announced their earnings, 77.3% surpassed expert predictions, according to data compiled by LSEG. The long-term average is 66.7%. Shares in Alphabet dipped 1.8% prior to the opening bell, while Microsoft gained 1.1%. Arm Holdings surged 2.6% after Nikkei Asia reported that SoftBank Group’s-supported semiconductor designer planned to create AI chips, intending to introduce its first products in 2025. GameStop’s shares skyrocketed by 21.2%, followed by a 57% increase in May, whilst AMC Entertainment rose 6.9%.