The rise in Big Tech that drove the S&P 500 above 5,000 for the first time on Friday appeared to continue, as Amazon.com Inc., Nvidia Corp., and Tesla Inc. all rose in premarket trade. Moves outside those standouts were moderate in S&P 500 and Nasdaq 100 futures trading, as well as US Treasuries and the currency.
The next market pressure point will be Tuesday’s consumer price index release. The annual US inflation rate is expected to fall to 2.9% in January from 3.4% the previous month, according to Bloomberg’s consensus projections.
That would be the first reading below 3% since March 2021, indicating a disinflationary trend that would influence the extent and timing of rate decreases. Speeches by Minneapolis Fed President Neel Kashkari, Fed Governor Michelle Bowman, and Fed President Tom Barkin later Monday may help moderate such expectations.
“As long as we see this gradual decline, they should be confident enough to cut,” said Pooja Sriram, US economist at Barclays, referring to Fed officials. “It still appears that we are at a point where interest rates are high; they might cut into the economy, and there may be room for those to be reduced.
Swaps markets predict that the Fed would only slash interest rates four times in 2024, down from seven at the end of last year and somewhat more than the three that officials have planned.
“Market pricing aims to persuade central banks to act and begin reducing interest rates. In a message to clients, Iain Stealey, worldwide chief investment officer for fixed income at J.P. Morgan Asset Management, argued that the market has recently been too optimistic. “Employment has remained strong, purchasing managers’ surveys are healthy and economic growth is robust.”
The yen remained close to a two-month low set on Friday, after central bankers’ statements that the Bank of Japan will raise interest rates gradually. This year, Japan’s currency has depreciated versus all of its G-10 counterparts.