Investing.com — U.S. stock index futures were lower in overnight trading Monday after a bumper jobs report raised doubts about the Federal Reserve’s plans to cut interest rates sharply.
These uncertainties have been heightened by the anticipation of key inflation data due later in the week, with any signs of flat inflation likely to dampen expectations of interest rate cuts.
Wall Street indices fell sharply on Monday as traders anticipated another big interest rate cut by the Federal Reserve, while a storm of other negative factors also took their toll.
It settled at 5,746.50 points, while it settled at 19,992 points by 19:58 ET (23:58 GMT). It fell slightly to 42235.0 points.
The Fed had expected to cut interest rates by 25 basis points in November
Although Friday’s bumper payrolls reading indicated some resilience in the US economy, it saw traders significantly reduce their expectations for an interest rate cut by the Federal Reserve.
Traders showed that there is an 80.9% chance that the Fed will cut interest rates by 25 basis points in November, and a 19.1% chance that the central bank will not cut rates at all.
Traders were also seen pricing in a higher final rate for the Fed’s current easing cycle.
The central bank cut interest rates by 50 basis points in September and announced the start of an easing cycle. But it still points to a data-driven approach to cutting interest rates in the future.
The September meeting is scheduled for Wednesday.
Thursday’s data is scheduled to be released closely, as investors watch for any signs of inflation remaining steady.
Wall Street sinks as interest rate expectations change
Bets on smaller interest rate cuts led to sharp losses on Wall Street on Monday, falling nearly 1% to 5,695.94 points. The index fell 1.2% to 17,926.04 points, while it fell 0.9% to 41,954.24 points, retreating from record high levels.
The sell-off in big tech names also weighed on Wall Street, after Google owner Alphabet Inc (NASDAQ:) was ordered to overhaul its Android mobile app store. Negative analyst comments on Amazon.com Inc (NASDAQ:) and Apple Inc (NASDAQ:) also spurred selling in both heavyweights.
Risk appetite was dented by fears of escalating conflict in the Middle East, while the US braced for another major hurricane – Milton – which is expected to make landfall this week. The country was still suffering from the impact of Hurricane Helen.
The third-quarter earnings season is also scheduled to begin later this week, with a slew of major banks preparing their reports.