Stock futures exhibited minimal movement on Sunday evening as investors prepared for imminent inflation data amid ongoing political instability abroad that could potentially disrupt the bond market.
This cautious approach follows a disappointing jobs report released on Friday, which heightened recession concerns while also strengthening expectations for a rate cut from the Federal Reserve later this month.
Futures on the Dow Jones Industrial Average ticked up by 11 points, reflecting a 0.02% increase. Similarly, S&P 500 futures registered a marginal rise of 0.02%, while Nasdaq futures climbed by 0.10%.
In the bond market, the yield on the 10-year Treasury dropped by 1 basis point, settling at 4.076%. Concurrently, the U.S. dollar appreciated by 0.11% against the euro and rose by 0.70% against the yen, following the announcement that Japan’s Prime Minister would resign after just under a year in office.
This political upheaval in Japan, the world’s fourth-largest economy, has the potential to unsettle the bond market as investors assess whether the next prime minister will prioritize fiscal restraint or adopt a more expansive fiscal policy. In France, the government faces a confidence vote on Monday, sparked by rising bond yields as “bond vigilantes” anticipate continued political gridlock and insufficient efforts to address deficits.
In the commodities market, U.S. oil prices increased by 0.23% to $62.01 per barrel, with Brent crude also gaining 0.23% to reach $65.63. This slight uptick occurs despite key OPEC+ members agreeing to implement another production hike as part of their strategy to capture larger market shares.
Gold prices fell by 0.55% to $3,633 per ounce, yet still remain near record highs, buoyed by rising fears of an impending recession that pushed investors toward safe-haven assets last week.
The labor market demonstrates additional signs of weakness, as highlighted by Moody’s Analytics chief economist Mark Zandi, who pointed out that the majority of U.S. industries have experienced job losses for several months. He emphasized that such a trend is typical during recessionary periods.
Given the current labor market dynamics, the likelihood of a Fed rate cut seems almost assured. According to CME’s FedWatch tool, Wall Street is anticipating some form of a cut when the Fed announces its policy decision on September 17, with a 92% probability attached to a 25 basis point reduction. The forthcoming inflation reports, particularly any unexpected spikes, could alter these expectations.
On Wednesday, the producer price index for August is expected to reveal a 0.3% month-on-month increase, a moderation from July’s 0.9% surge. Subsequently, the consumer price index is due out on Thursday, with projections indicating a 0.3% increase, marking an acceleration from the previous month’s 0.2% rise. Year-on-year, the CPI is anticipated to climb to 2.9% for August, up from 2.7% in July.
Despite these projections, core consumer price inflation is predicted to remain stable at an increase of 0.3% month-on-month and 3.1% year-on-year. However, both the headline and core CPI figures continue to exceed the Fed’s 2% target.
Amid these economic considerations, Fed Governor Lisa Cook is facing attempts by former President Trump to dismiss her, with a judge potentially deciding this week whether she will participate in the upcoming Federal Open Market Committee (FOMC) meeting. Additionally, the Senate might vote on Trump’s nomination of White House economic adviser Stephen Miran to the Fed’s board of governors, which would grant him a role in that meeting.
