Futures muted as markets await rate cut clues; China stimulus boosts miners
By Johann M Cherian and Purvi Agarwal
(Reuters) -U.S. stock index futures were muted in choppy trading on Tuesday, as investors scoured for clues on what the Federal Reserve’s next policy move might be, while mining stocks got a boost after China unveiled a bumper stimulus package.
The S&P 500 and the blue-chip Dow closed at record highs in the previous session after a survey signaling steady business activity soothed concerns of an imminent recession, and as a number of policymakers supported further policy easing by the Fed.
“(Monday’s data) suggested that the economy’s strength was continuing into September, and that fears of a downturn weren’t evident so far,” analysts at Deutsche Bank said in a note.
“Investors are still completely split on the size of the Fed’s next move … so we might find ourselves with a real sense of deja vu over the coming weeks if that remains.”
Yields on longer-dated Treasury bonds rose as traders priced in a greater likelihood of the economy achieving growth with low inflation and unemployment.
However, with the benchmark index’s valuations high above long-term averages and clarity still lacking about the size of the Fed’s next move, some investors stayed away from big bids.
At 7:24 a.m. ET, Dow E-minis were up 4 points, or 0.01%, S&P 500 E-minis were down 0.75 points, or 0.01% and Nasdaq 100 E-minis were up 0.25 points, or flat.
The Fed’s decision to commence its policy easing cycle last week sparked a market rally that has propped up Wall Street’s main indexes for monthly gains and set on track to defy the historical trend of losses on average in September.
Fed Governor Michelle Bowman’s remarks are in focus on the day. She had voted for a 25 basis point rate reduction on signs of persistent price pressures, as opposed to the larger 50 bps rate cut the central bank delivered in the previous week.
Traders are pricing in the Fed’s November decision to be a coin toss, with bets neither strongly favoring a 50 bps nor a 25 bps reduction, as per the CME Group’s (NASDAQ:CME) FedWatch Tool.
On the data front, a survey, due at 10:00 a.m. ET., is expected to show consumer confidence improved in September from the previous month. Still, the main focus will be on Friday’s Personal Consumption Expenditure figure for August.
Among top premarket movers, U.S.-listed shares of Chinese firms such as Alibaba (NYSE:BABA) and PDD Holdings added 5.4% each and Li Auto (NASDAQ:LI) advanced 7.6% after the world’s second-largest economy, China, unveiled its biggest stimulus since the pandemic to pull the economy out of its deflationary funk.
The upbeat mood also lifted copper and lithium miners. Freeport-McMoRan (NYSE:FCX) added 4.5%, Southern Copper (NYSE:SCCO) rose 4.2%, Albemarle (NYSE:ALB) advanced 4.6% and Arcadium climbed 3.2%.
Visa (NYSE:V) lost 2% after a report showed the U.S. Department of Justice plans to file a lawsuit against the payments network operator, alleging that it illegally monopolized the country’s debit card market.
Starbucks (NASDAQ:SBUX) dropped 1.6% after Jefferies downgraded the coffee chain to “underperform” from “hold”, while Salesforce (NYSE:CRM) rose 1.5% after Piper Sandler upgraded the software company to “overweight” from “neutral”.
