Futures are advancing as declining inflation raises hopes for a rate cut

By Shristi Achar A and Shashwat Chauhan

(Reuters) -Futures tracking Wall Street’s major stock indexes rose on Monday after the latest inflation data showed moderating consumer prices, boosting hopes for an early rate cut by the Federal Reserve.

Commerce Department data on Friday showed the personal consumption expenditures (PCE) price index – the Fed’s preferred inflation gauge – rose 0.3% in February, compared with estimates of a 0.4 increase %, according to economists polled by Reuters.

The report reinforced expectations for rate cuts, with money markets estimating a 66% chance of a cut of at least 25 basis points in June, up from 55% a day before the data release, according to CME Group’s FedWatch tool .

Fed Chairman Jerome Powell said Friday that the latest U.S. inflation data is “in line with what we would like to see” – comments that appeared to keep the central bank’s baseline for rate cuts this year intact.

“If activity continues, the Fed could make three rate cuts this year. But with further weakening in the labor market, we expect five rate cuts this year,” Citigroup analysts wrote in a note.

However, market participants expect the central bank to continue to hold interest rates at its upcoming policy meeting in May.

Most mega-cap growth stocks, which will benefit from lower interest rates, rose in premarket trading, with Microsoft, Nvidia and Tesla up about 0.6% each.

That signals a solid start to the second quarter, after the benchmark S&P 500 rose 10.16% in the first three months of the year, its biggest gain since 2019. At the latest close, the blue-chip Dow Jones is down 1% away from exceeding the 40,000 level for the first time.

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