U.S. stock futures fell on Monday as investors overhauled their views on interest rate cuts following the release of a big jobs report ahead of key inflation data and the start of earnings season.
Dow Jones Industrial Average futures (YM=F) fell 0.4% after hitting a record high after ending the week on a sharp rise. S&P 500 futures (ES=F) fell by about 0.5%, and the tech-heavy Nasdaq 100 (NQ=F) led the decline by 0.6%.
Hopes for a major interest rate cut by the US Federal Reserve disappeared after September’s better-than-expected jobs report allayed concerns about cracks in the labor market. The benchmark 10-year Treasury yield (^TNX) hit 4% for the first time since August amid doubts about the Fed’s next move.
Read more: What Fed Rate Cuts Mean for Bank Accounts, CDs, Loans, and Credit Cards
Traders abandoned bets on a 0.50% rate cut in November last week and now see an 88% chance of a 0.25% rate cut, according to the CME FedWatch tool. Such expectations could depress stock prices, which have soared to record highs amid expectations of a sharp interest rate cut and a “soft landing” for the economy.
We await Thursday’s October Consumer Inflation Report for new insight into whether the Fed is making progress in its efforts to reduce price pressures to its 2% target.
The start of Q3 earnings could bring renewed attention to the market. After the release of Pepsi’s (PEP) earnings on Thursday, the season begins in earnest with reports from major banks JP Morgan (JPM), Wells Fargo (WFC), and BlackRock (BLK) on Friday. .
