Wall St set for mixed open in cautious start to Fed meeting week

By Johann M Cherian and Purvi Agarwal

(Reuters) - The main U.S. stock indexes were set for a mixed open on Monday as caution set in on Wall Street ahead of the Federal Reserve's pivotal monetary policy decision, due later in the week, with a majority of traders pricing in a steep cut in borrowing costs.

Following a diverse batch of economic data and comments from a former policymaker in the last few weeks, traders swayed in their bets on what decision the central bank would arrive at during its Sept. 17 to 18 meeting.

Odds for a 50-basis-point cut are at 65% from 30% a week ago, according to the CME FedWatch Tool, which showed a 35% probability for a 25-basis-point reduction. There is concern an outsized move could mean the Fed sees the economy cooling at a faster-than-anticipated pace.

"Influential investors have been talking about the need for a 50-basis-point cut and we're seeing increased talk of recession risks. As a result, there's betting that we will get something other than the 25-bps cut," said Sam Stovall, chief investment strategist at CFRA Research.

"It would be a good thing for the Fed to imply that they are ahead of the curve."

Markets have been in a bull run since the start of this year on expectations the world's most influential central bank would kick off its monetary policy easing cycle soon. The S&P 500 and the Dow are currently near record highs.

The benchmark index and the tech-heavy Nasdaq notched their biggest weekly jumps in about 11 months on Friday, although analysts attributed the optimism to signs of a robust economy rather than rate-cut expectations.

At 08:30 a.m., Dow E-minis were up 102 points, or 0.25%, S&P 500 E-minis were down 4.5 points, or 0.08% and Nasdaq 100 E-minis were down 88.75 points, or 0.45%.

Futures tracking small caps, which tend to do well with lower borrowing costs, outperformed with a 0.42% rise. The Russell 2000 index has gained over 7% so far this year and hit its highest level in over a week on Friday.

In economic data, retail sales, weekly jobless claims, housing starts and industrial production are due through the week.

Among rate-sensitive growth stocks, Nvidia (NASDAQ:NVDA ) slipped 1.7%, while Microsoft (NASDAQ:MSFT ) and Tesla (NASDAQ:TSLA ) dipped 0.20% each in premarket trading.

Most semiconductor stocks also traded lower, with Micron Technology (NASDAQ:MU ) down 3% after hitting a near-two week high on Friday. Broadcom (NASDAQ:AVGO ) and Qualcomm (NASDAQ:QCOM ) was each off more than 1.3%.

Apple (NASDAQ:AAPL ) slipped 2.5% after an analyst at TF International Securities said demand for its latest iPhone 16 models was lower than expected.

Intel Corp (NASDAQ:INTC ) climbed 1.3% after a report showed the chipmaker has officially qualified for as much as $3.5 billion in federal grants to make semiconductors for the U.S. Department of Defense.

Crypto stocks trended lower, with MicroStrategy and Coinbase (O:COIN ) slipping more than 2% each as bitcoin prices fell.



Alcoa (NYSE:AA ) gained 1.6% after the aluminum maker said on Sunday it would sell a 25.1% stake in its joint venture with Saudi Arabia's Ma'aden for $1.1 billion.

U.S.-listed shares of Bausch + Lomb jumped 20% after a report said the eye care firm was exploring a sale.

Source: Investing.com