Stock futures were rising early Monday as investors awaited key inflation data ahead of the Federal Reserve’s September interest-rate decision.
Futures on the Dow Jones Industrial Average and S&P 500 were both 0.2% higher, while Nasdaq 100 futures were up 0.3% in early trading. All three major indexes fell Friday after giving up gains as investors weighed expectations of more rate cuts against fears over the economy following August’s weak jobs report.
The U.S. economy added 22,000 jobs in August, considerably below the 76,500 expected by economists, while the combined numbers for June and July were revised 21,000 lower.
Traders now see a 67% probability of three rate cuts this year, up from 40% a week ago, according to CME’s FedWatch tool. A September cut is being priced in, the only question for markets appears to be whether it will now be a quarter-point or half-point reduction—the latter is currently given a 10% chance.
Inflation data this week could go a long way to answering that question—the producer prices index is due to be released Wednesday before the consumer price index (CPI) on Thursday.
“Our economists believe you’d need to see pretty weak inflation this week to get to that,” Deutsche Bank strategist Jim Reid said Monday, referring to the chances of a half-point cut.
Economists expect core CPI to rise 3.1% in August, flat on July’s number, according to FactSet data. The focus is likely to be on what impact tariffs are having on prices.
“While the FOMC do appear prepared to look-through the ‘one-time shift in price level’ caused by tariffs, inflation data of this ilk will nonetheless prevent anything larger than a 25 basis point cut being delivered later in the month,” Pepperstone strategist Michael Brown wrote.
Oil prices jumped around 1.5%, with Brent crude futures reaching $66.50 a barrel early Monday, after the OPEC cartel of producers agreed to hike production further at a meeting Sunday.
The yield on the 10-Year Treasury ticked higher to 4.083% early Monday, while the U.S. Dollar Index slipped 0.1% to 97.68.