Stephen Chernin
Stock index futures were lower Monday with attention now firmly on when the Fed will pull the trigger on rate hikes.
S&P futures (SPX) -0.3%, Dow futures (INDU) -0.3% and Nasdaq 100 futures (NDX:IND) -0.4% edged down.
“All roads this week point to payrolls on Friday with the usual build up via JOLTS (tomorrow) and ADP (Wednesday). Elsewhere in the US the Services ISM is out tomorrow (we will also watch the employment sub component ahead of payrolls), and the initial read on inflation expectations in the University of Michigan confidence sentiment release (Friday) will be of note after 5-10yr expectations ticked up to a decade high of 3.2% last month,” Deutsche Bank’s Jim Reid said. “Remember the Fed are now on a blackout period ahead of next week’s FOMC so some of the big catalyst for moves of late, i.e. Fed speakers, won’t be there.”
The 10-year Treasury yield (US10Y) rose 2 basis points to 4.25% and the 2-year yield (US2Y) rose 4 basis points to 4.60%.
Fed funds futures now price in nearly a 60% chance of the first Fed rate cut coming in March.
“The Fed’s hold versus cut decision depends on how fast the US economy slows, in our view,” Standard Chartered’s Steve Englander said. “The 8 December labor release will be key to expectations of how fast the Fed moves.”
“NFP 210k and positive revisions (20% probability) is probably the most dangerous outcome from a market perspective. It would force a re-evaluation of how fast the US economy is deteriorating and how fast the Fed would have to cut rates.”
After the start of trading, October factory orders is out. The consensus is for a decline of 2.6% on the month.