US stock futures showed modest gains as traders positioned themselves ahead of a crucial inflation report that could influence expectations regarding an interest-rate cut from the Federal Reserve.
Contracts on the S&P 500 rose by 0.1%, while those on the Nasdaq 100 increased by 0.2%. Despite Wall Street's trajectory toward its best annual performance since 2019, the pace of gains has slowed following a series of record highs in recent weeks.
Alphabet Inc. emerged as a leader in premarket trading, surging as much as 3.9% following discussions about advancements in quantum computing linked to its new Willow quantum chip. Oracle Corp. faced challenges, with its quarterly results falling short of expectations, leading to a decline in its stock. Nvidia Corp. also experienced a downturn amid reports of an investigation by Chinese authorities into alleged anti-monopoly violations.
The market's focus is now firmly on the upcoming US consumer price index (CPI) report, which is the last significant reading before the Federal Reserve's policy meeting next week. Any indication that inflation progress has stalled could diminish the likelihood of a third consecutive rate reduction. It would take a significantly negative CPI report to alter the market's outlook for a rate cut this month. If the inflation data aligns with expectations, it is unlikely to shift the prevailing sentiment.
Market analysts are expressing a sense of caution as they await the inflation data, with some suggesting that the markets may have exhausted their momentum as the year draws to a close. Participants are looking for a fresh catalyst to drive market activity. Even a strong monthly payrolls report had not deterred expectations for further policy easing, with money markets currently pricing in an approximately 80% chance of a quarter-point rate cut next week.
This week is pivotal for monetary policy, with the European Central Bank anticipated to implement its fourth rate cut of the year amid a challenging economic landscape and political instability in France and Germany. Additionally, the Swiss National Bank is expected to lower rates on Thursday, while Canada may follow suit on Wednesday.
In parallel to the US economic landscape, global markets are also reacting to various central bank policies. The upcoming Central Economic Work Conference in China is expected to provide insights into potential fiscal support measures, following commitments to a "moderately loose" monetary policy for 2025. Chinese stocks initially rose on Tuesday but relinquished most of those gains by the market's close, reflecting the volatility and uncertainty that often accompany such significant policy discussions.
In Europe, the Stoxx 600 index experienced a decline, putting an end to an eight-day winning streak. This downturn underscores the broader challenges facing European markets as they navigate a complex economic environment characterized by slowing growth and political uncertainties. Investors are closely monitoring these developments, as they could have far-reaching implications for global financial markets and economic stability.
As the week progresses, market participants will be keenly observing the interplay between inflation data, central bank decisions, and geopolitical factors. The outcomes of these events will likely shape market sentiment and investment strategies in the near term, as traders and investors seek to navigate the evolving landscape of both traditional finance and emerging sectors like cryptocurrency.