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Futures lower, Fed decision and U.S. CPI ahead this week - what's moving markets

Published 06/10/2024, 03:54 AM
© Reuters
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Investing.com -- U.S. stock futures tick lower ahead of week that is set to be highlighted by a Federal Reserve interest rate decision and crucial inflation data. Elsewhere, Elliott Investment Management reportedly takes a stake in Southwest Airlines (NYSE:LUV) as the activist investor looks to spur on a turnaround in performance at the low-cost carrier.

1. Futures lower

U.S. stock futures pointed lower on Monday, as investors looked ahead to a major Federal Reserve interest rate decision and key monthly inflation data later in the week.

By 03:46 ET (07:46 GMT), the Dow futures contract had shed 87 points or 0.2%, S&P 500 futures had slipped by 6 points or 0.1%, and Nasdaq 100 futures had edged down by 43 points or 0.3%.

The main averages on Wall Street fell following choppy trading in the prior session, dragged down by a stronger-than-projected jobs report which exacerbated concerns that the Fed could delay the timing of potential rate cuts for a longer period of time than some investors had been expecting.

However, the benchmark S&P 500, tech-heavy Nasdaq Composite, and 30-stock Dow Jones Industrial Average posted weekly gains.

2. Fed decision this week

Markets widely expect the Fed to keep borrowing costs on hold at more than two-decade highs at the conclusion of its next policy gathering on Wednesday, meaning the spotlight will likely shine on any indications the central bank gives about its outlook for rates.

The first update in three months to the Fed's dot plot -- a closely-watched gauge of policymakers' rate expectations -- is tipped to show that officials are anticipating two 25-basis point cuts this year, down from three in March.

Several Fed officials have recently signaled that they would like to see more evidence inflation is cooling sustainably toward their 2% target pace before beginning to roll out cuts. Price gains have eased in the wake of a campaign of aggressive Fed rate hikes that started in 2022, but remain above 2%.

3. May inflation data due out this week

Fresh U.S. inflation figures are due to be released just hours before the Fed's decision is announced on Wednesday.

Economists forecast that annualized headline price growth in May matched the previous month's pace, but slowed on a monthly basis. The so-called "core" reading, which strips out more volatile items like food and fuel, is seen decelerating slightly year-on-year and staying in line with April's rate month-on-month.

The numbers will be watched keenly by Wall Street, as they could provide some insight into the path ahead for Fed policy later this year. According to CME Group's (NASDAQ:CME) closely-monitored FedWatch Tool, there is now a roughly 53% chance the Fed will bring rates down from their current level of 5.25% to 5.5% as soon as September.

4. Elliott takes almost $2 billion stake in Southwest Airlines - WSJ

Elliott Investment Management has built up a nearly $2 billion stake in Southwest Airlines and intends to push for changes to reverse the carrier’s underperformance, the Wall Street Journal reported on Sunday.

The activist investor is now one of Southwest's largest shareholders, the WSJ added, citing people familiar with the matter.

The report comes as Southwest’s shares are trading down nearly 4% so far in 2024 and are hovering below their level in March 2020, when the COVID-19 pandemic sparked travel restrictions that weighed heavily on the wider airline industry.

Along with the impact of COVID, Southwest, which once posted 47 consecutive years of profits, has been hit by higher costs stemming from new labor contracts and delays to deliveries from embattled planemaker Boeing (NYSE:BA).

5. Crude inches higher

Crude prices rose Monday, steadying after three straight weeks of losses ahead of monthly reports from OPEC and the IEA, as well as the latest meeting from the Federal Reserve.

By 03:36 ET, the U.S. crude futures (WTI) traded 0.3% higher at $75.77 per barrel, while the Brent contract climbed 0.4% to $79.91 a barrel.

The Organization of the Petroleum Exporting Countries is set to release its monthly report on Tuesday, where the oil group’s outlook on annual crude demand will likely be in focus.

A monthly report from the International Energy Agency is also due later this week.

The crude market sank to its third straight weekly loss last week on worries that a plan to unwind production cuts by OPEC and its allies, a group known as OPEC+, from October will add to rising global supply.

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