U.S. stock futures retreated on Monday as investors revised their views on rate cuts following a bombshell jobs report, ahead of a week of key inflation data and the start of earnings season.
Dow Jones Industrial Average futures (YM=F) fell 0.4% after setting a new record, while stocks soared to end the week. S&P 500 futures (ES=F) lost about 0.5%, while contracts on the tech-heavy Nasdaq 100 (NQ=F) led the losses with a decline of 0.6%.
Hopes of an outsized Federal Reserve rate cut have faded after a better-than-expected jobs report in September eased concerns about rifts in the labor market. Ten-year Treasury yields (^TNX) hit 4% for the first time since August amid doubts about the Fed’s next move.
Read more: What the Fed’s interest rate cut means for bank accounts, CDs, loans and credit cards
Traders have abandoned last week’s bets on a 0.50% rate cut in November and now see an 88% chance of a 0.25% move, according to the CME FedWatch Tool. These expectations could be a drag on stocks, which have rallied to records on confidence that big rate cuts and an economic “soft landing” were on the table.
We now have to wait for the October consumer inflation report, due Thursday, which will provide new insight into whether the Fed is making progress in returning already cooling price pressures to its 2% target.
The start of third-quarter earnings results is in focus as Goldman Sachs (GS) has raised its target for the S&P 500 (^GSPC) and says it expects higher margin growth for companies. Following Pepsi’s (PEP) results on Thursday, the season kicks off in earnest on Friday with reports from major banks JPMorgan (JPM), Wells Fargo (WFC) and BlackRock (BLK).
