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U.S. Stock Futures Rise as Investors Assess Fed Rate Cut Expectations

Investing.com – U.S. stock futures advanced on Monday, signaling a potential extension of the Christmastime rally, with investors closely monitoring the prospects of Federal Reserve interest rate cuts in the coming year. In other news, Illumina announces plans to divest cancer-test seller Grail following antitrust scrutiny, and China’s SenseTime faces a decline in shares after the announcement of its founder’s death.

  1. Futures Show Modest Gains

U.S. stock futures inched higher on Monday, hinting at a possible continuation of the Christmastime rally driven by expectations of a Federal Reserve policy pivot in the upcoming year.

As of 05:01 ET (10:01 GMT), Dow futures rose by 73 points (0.2%), S&P 500 futures increased by 12 points (0.2%), and Nasdaq 100 futures edged up by 23 points (0.1%).

Last week’s mixed performance on Wall Street, influenced by comments from New York Fed President John Williams, dampened immediate hopes for interest rate cuts. Williams noted that policymakers were not actively discussing rate cuts at the moment, tempering speculation about a reduction from more than two-decade highs in the spring.

The Fed’s decision last week to maintain steady borrowing costs at 5.25% to 5.50%, coupled with quarterly projections indicating potential cuts in 2024, supported a rally in benchmark indices. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite closed the week with their seventh consecutive gains. U.S. Treasury yields also declined.

  1. Gold Prices Surge Amid Fed’s Dovish Outlook

The Fed’s dovish stance has driven a surge in gold prices, setting the yellow metal on track for its first annual increase since 2020.

Investors now perceive a roughly 65% chance of a quarter-point rate reduction by March 2024, up from just under 42% the previous week. The expectation of a further cut in May stands at around 58%, a significant increase from the previous week’s mark of about 24%.

These expectations have impacted the appeal of holding zero-yield bullion, and a weakening U.S. dollar has further supported gold prices. At 05:01 ET on Monday, spot gold prices had risen by 0.2% to $2,023.13 per troy ounce.

  1. Illumina to Divest Grail Amid Antitrust Scrutiny

Illumina has announced plans to divest cancer-screening start-up Grail as the gene-sequencing device maker aims to address antitrust concerns in the U.S. and Europe.

The divestiture will occur through a “third-party sale or capital markets transaction.” Illumina acquired Grail in 2021 for $7.1 billion, facing heavy scrutiny, especially after completing the deal without formal European Commission approval. The decision to divest aligns with an order from Brussels and addresses concerns raised by the U.S. Federal Trade Commission. Shares in Illumina edged higher in premarket trading on Monday.

  1. SenseTime Shares Decline Following Founder’s Death

Shares in SenseTime Group slumped on Monday, reaching an all-time low, after the Chinese artificial intelligence company announced the death of its founder, Tang Xiao’ou.

Tang, a professor at the Chinese University of Hong Kong, founded SenseTime in 2014. Despite the company’s success in AI-based content generation and facial recognition technology, it has been blacklisted by U.S. authorities since 2019, alleging involvement in state surveillance of Uyghur minorities in China’s Xinjiang region.

  1. Oil Prices Experience Volatility

Oil prices exhibited volatility on Monday, influenced by Russian export reductions, concerns over attacks on commercial vessels in the Red Sea, and weak business morale data in Germany.

As of 06:23 ET, U.S. crude futures traded 0.5% higher at $72.17 per barrel, and Brent crude climbed 0.6% to $76.99 per barrel. The support from Russia’s announcement of deeper oil export cuts was accompanied by worries about potential disruptions to global supplies due to shipping firms avoiding the Suez Canal amid increased assaults by Houthi militants in Yemen.

German business sentiment unexpectedly worsened in December, impacting oil prices. Additionally, Goldman Sachs trimmed its price expectations for Brent crude in 2024, citing strong U.S. output that could mitigate upward pressure on oil prices.

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