US STOCK index futures were subdued on Monday (Feb 12), following a strong close to the previous week, with focus on a slew of economic data points that could clear out some uncertainty on the outlook for interest rate cuts.
The latest milestone in a four-month rally among Wall Street’s main indexes was the S&P 500 closing above the psychological 5,000-point level on Friday, while the Nasdaq briefly surpassed the 16,000 mark, bringing it closer to its all-time high hit in November 2021.
“Investors now wonder if it is time to take some profits ahead of a likely market drop from exhaustion after scaling such a prominent peak,” said Sam Stovall, chief investment strategist at CFRA Research.
“While short-term digestions of gains have indeed occurred, they have been fairly short in duration, so view them more as reasons to buy than bail.”
Much of the frenzy has been led by mega-caps with greater exposure to artificial intelligence, aided further by hopes of imminent rate cuts and an upbeat outlook from businesses. LSEG data showed S&P 500 firms expect earnings to rise by 9.7 per cent this year.
The benchmark index’s forward price-to-earnings ratio rose to 20.4 times in the previous week, way past the historic average of 15.7 times, as per LSEG data, stoking some concerns over rich valuations.
Traders await January’s consumer price index, due on Tuesday, to determine what could be the timeline for monetary policy easing this year. Other data through the week also includes the producer price index, industrial production, retail sales, housing numbers and preliminary University of Michigan consumer sentiment.
With growing data reflecting a robust economy, central banks have effectively been able to push back against traders’ expectations for early rate cuts. The odds for at least a 25-basis-point rate reduction in May have dropped to 61 per cent, from over 95 per cent at the start of 2024, as per the CME FedWatch Tool.
Remarks from Federal Reserve officials including Governor Michelle Bowman, Richmond president Thomas Barkin and Minneapolis chief Neel Kashkari, scheduled through the day, will be scrutinised for any hints on the timing for rate cuts.
On the quarterly earnings front, Trimble added 8.6 per cent in pre-market trading ahead of its results, while Coca-Cola, Biogen and Airbnb are among well-known names expected to report through the week.
Citigroup slipped 1.4 per cent after Reuters reported that US regulators have asked the lender for urgent changes to how it measures the default risk of trading partners and its own auditors have found a plan to improve internal oversight to be lacking.
Applied Digital shed 6.2 per cent after saying revenue from its Ellendale data center hosting facility would take a hit in the current quarter by an ongoing power outage.
Diamondback Energy rose 0.9 per cent after announcing a deal to buy the largest privately held oil and gas producer in the Permian basin, Endeavor Energy Partners, for US$26 billion.
Joby Aviation gained 5.4 per cent as the electric-powered aircraft maker signed an agreement to launch air taxi services in the Emirate by early 2026. REUTERS
