US futures muted as markets digest in-line inflation, rate cut bets

Investing.com-- U.S. stock index futures moved little in evening deals on Sunday, after an in-line reading on key inflation data saw Wall Street shoot up on hopes that the Federal Reserve will still cut interest rates this year.

S&P 500 Futures rose 0.1% to 5,300.75 points, while Nasdaq 100 Futures steadied at 18,590.0 points by 19:39 ET (23:39 GMT). Dow Jones Futures rose 0.1% to 13,830.0 points. 

September rate cut bets rise after PCE data reads as expected 

Wall Street indexes surged on Friday after PCE price index data- which is the Fed’s preferred inflation gauge- read as expected for April.

The PCE reading showed some mild cooling in inflation, although it still remained well above the Fed’s 2% annual inflation target.

Still, the reading, coupled with other recent indicators of a cooling U.S. economy, spurred some bets that the central bank will begin cutting interest rates in September.

Traders were seen pricing in a roughly 47% chance for a 25 basis point cut in September, along with a roughly 45% chance that the Fed will hold, according to the CME Fedwatch tool. This positioning helped boost U.S. stocks. 

The S&P 500 rose 0.8% to 5,277.51 points on Friday, while the Dow Jones Industrial Average rallied 1.5 to 38,686.32 points. The NASDAQ Composite lagged on weakness in tech stocks, ending flat at 16,735.02 points. 

Nonfarm payrolls, Fed meeting approach 

Focus now turns to upcoming nonfarm payrolls data for May, due later this week, which is set to offer more cues on the labor market- another key consideration for the Fed in cutting interest rates.

The central bank is set to meet next week and is widely expected to keep rates steady. But any commentary on future rate decisions will be closely watched. 

Several Fed officials had warned in recent weeks that sticky inflation gave the bank little confidence to begin cutting interest rates. 

Focus this week is also on purchasing managers index readings for May.