U.S. stock index futures edged higher on Wednesday as investors increased their bets on an earlier start to the Federal Reserve’s rate cuts this year, driven by a series of economic data indicating slowing growth.
Wall Street ended Tuesday’s session with modest gains, recovering some losses, with rate-sensitive real estate stocks leading sector gains.
This followed initial declines after data showed U.S. job openings in April fell to their lowest in over three years, the latest sign of cooling in the world’s largest economy. This data suggests the Federal Reserve might have more flexibility to cut interest rates.
Markets are now pricing in about 44 basis points of easing this year, according to the LSEG rate probabilities app. Additionally, expectations for a September rate cut are around 65%, up from below 50% last week, according to the CME’s FedWatch tool.
“The JOLTS report follows a string of soft economic data releases and suggests a gradual cooling in the U.S. economy… market participants are likely to welcome a cooling economy and the prospect of monetary easing, given the overwhelmingly bullish outlook among investors,” analysts at BCA Research noted.
Earlier in the year, signs of steady inflation and resilient economic growth had tempered hopes for both the timing and pace of interest-rate cuts, with many initially expecting policy easing to begin as early as March.
Rate-sensitive megacap stocks rose in premarket trading, with Nvidia (NASDAQ), Microsoft (NASDAQ), and Amazon.com (NASDAQ) gaining between 0.3% and 1.0%.
Investors now await the nonfarm payrolls report, due on Friday, for a comprehensive evaluation of the labor market. The ADP National Employment Report and surveys on the services sector are also expected later on Wednesday.
As of 7:09 a.m. ET, Dow e-minis were up 45 points, or 0.12%, S&P 500 e-minis were up 9.5 points, or 0.18%, and Nasdaq 100 e-minis were up 71.5 points, or 0.38%.
Among other stocks, Dollar Tree (NASDAQ) slipped 2.7% in volatile trading after issuing a disappointing quarterly profit forecast. The discount retailer also announced it would explore options, including a potential sale or spin-off of Family Dollar.
Intel (NASDAQ) gained 0.8% after Apollo Global Management (NYSE
) agreed to purchase a 49% equity interest for $11 billion in a joint venture related to Intel’s manufacturing unit in Ireland.
Applied Materials (NASDAQ) added 1.9% after brokerage Barclays upgraded the chip stock to “equal weight” from “underweight.”
CrowdStrike Holdings (NASDAQ) jumped 9.7% after forecasting second-quarter revenue above estimates, driven by strong demand for its cybersecurity offerings.
Hewlett Packard Enterprise (NYSE) saw its shares rise 15.0% after forecasting third-quarter revenue above street expectations, fueled by strong demand for its artificial intelligence servers.
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