Global stocks were muted on Monday amid a quiet session with U.S. markets closed for the Presidents Day holiday. Investors remain focused on the outlook for inflation and interest rates, as well as corporate earnings and trends in artificial intelligence—which has driven outsize gains in tech stocks in recent months.
U.S. stock-index futures continued to trade, with contracts tracking the
Dow Jones Industrial Average
up 20 points, or 0.1%, after the index fell 145 points last Friday to finish at 38,627.
S&P 500
futures advanced less than 0.1% with contracts following the tech-heavy
Nasdaq
gaining 0.2%.
It’s set to be a sparse few days on the economic data calendar—traders have to wait until next week for the Federal Reserve’s preferred measure of inflation—though there are catalysts that could advance the narrative on the pathway for interest rates.
“Investor hopes of rapid cuts to interest rates by the Federal Reserve have cooled off, leading to more risk-off sentiment,” said Susannah Streeter, an analyst at broker
Hargreaves Lansdown,
pointing to Friday’s release of producer price index (PPI) inflation data that was hotter than expected, which weighed on stocks. “Friday falls on Wall Street have prompted wariness in London, with not much cheer emanating from Asia,” said Streeter.
In Europe, London’s
FTSE 100
shed 0.1% and the Paris
CAC 40
fell 0.5%. Frankfurt’s
DAX
dropped 0.3% and the pan-European
Stoxx 600
was down 0.2%.
In Asia, Hong Kong’s
Hang Seng Index
slipped 1.1% and Tokyo’s
Nikkei 225
finished just below flat. The
Shanghai Composite
gained 1.6%, making the benchmark a rare riser, as mainland Chinese markets returned from a weeklong closure amid the Lunar New Year holiday.
Shifting expectations for when and by how much the Fed will cut rates this year from a generational peak remains a core narrative for markets amid mixed signals on inflation and the health of the economy. Wednesday will see minutes released from the January meeting of the Fed’s monetary policy committee, and a spate of officials from the central bank will deliver remarks this week—all of which may shift the needle on rate expectations. Investors will be watching closely for signs of how Fed officials view the battle against inflation and how soon it may be appropriate to lower borrowing costs.
“It’s a U.S. holiday today so expect a quiet start to what is a quiet week for data,” said Jim Reid, a strategist at Deutsche Bank. “It’s a reflection of the world we live in that the most important event of the week may be
Nvidia’s
earnings on Wednesday. It is now the fourth largest company in the world and the best performer in the S&P 500 so far this year, so this will be very important for sentiment.”
Indeed, chip maker Nvidia’s earnings midweek are likely to be key for the technology stocks exposed to AI—a key investing trend over the past year—and the wider market at large.
Nvidia
and other tech giants have seen their stocks soar in recent months amid optimism over AI, propelling the wider S&P 500 higher.
“The stock market has been incredibly durable this year even with Fed rate cuts getting priced out and valuations being historically stretched. However, it’s crucial to note that the rally is driven by a handful of tech companies with exposure to artificial intelligence, and that many ‘older economy’ stocks have not participated,” said Marios Hadjikyriacos, an analyst at broker XM.
Write to Jack Denton at [email protected]
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