Wall Street eyes subdued open as rate cut optimism wanes

Nov 7 – Wall Street’s main indexes were set for a subdued open on Tuesday as optimism over potential rate cuts from the Federal Reserve next year waned, with investors on tenterhooks ahead of more commentary from central bank officials.

After a stellar rally last week driven by tumbling Treasury yields, equities have lost momentum in recent days as investors await commentary by Fed policymakers for any signs of a pushback against expectations that US interest rates have peaked.

Federal Reserve Bank of Minneapolis President Neel Kashkari doused hopes of early rate cuts, saying the central bank may have to do more to bring inflation back down to its 2% target.

Chicago Fed chief Austan Goolsbee acknowledged the downward trend in inflation but maintained price pressures are not yet over.

“We will be higher for longer. We think that the first rate cut will take place not in the second quarter of next year, but in the third quarter of next year,” said Sam Stovall, chief investment strategist of CFRA Research.

Adding to the pressure on stocks, US Treasury yields also rebounded from multi-week lows in the previous session, ahead of large bond auctions this week that could determine whether there is enough demand for US government debt.

The benchmark ten-year Treasury yield was last at 4.6224%, slightly lower than Monday’s level.

Market participants will parse commentary from Fed Board Governor Christopher Waller and New York Fed President John Williams later on Tuesday for more clues on the central bank’s interest rate path. Fed Chair Jerome Powell’s remarks will grab the spotlight on Wednesday.

Uncertainty about the timing of potential rate cuts and some dismal corporate forecasts for the fourth quarter have cast a doubt on whether there could be a year-end rally for stocks.

“History tells us that Q4 has always been positive. If we don’t get an advance toward the end of the year, then that implies that investors believe that something worse is likely to occur in the coming calendar year,” Stovall said.

The corporate earnings season has entered its last leg, with a majority of the companies in the S&P 500 having already reported results for the third quarter.

Uber Technologies forecast fourth-quarter adjusted core profit and gross bookings above market expectations but missed Wall Street’s profit target for the July-September period. Shares of the ride-hailing firm fell 1.8% in premarket trading.

EBay and Bumble are among those scheduled to post their results late on Tuesday.

At 8:19 a.m. ET, Dow e-minis were down 66 points, or 0.19%, S&P 500 e-minis were down 7.5 points, or 0.17%, and Nasdaq 100 e-minis were down 1 points, or 0.01%.

Oil firms including Exxon Mobil, Chevron and Occidental Petroleum fell between 0.8% and 1.1% premarket, tracking a 2% decline in crude prices on mixed economic data from China.

Shares of Intel edged up 0.7% after a report said the chipmaker was the leading candidate to likely get billions in government funding for secure defense-chip facilities.

(Reporting by Amruta Khandekar and Shristi Achar A in Bengaluru; Editing by Maju Samuel)