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Dow futures fall 40 pts; Powell testimony, nonfarm payrolls seen key

Published 06/03/2023, 13:55
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By Peter Nurse

Investing.com -- U.S. stocks are seen opening marginally lower Monday, consolidating after last week’s gains and ahead of testimony from Fed chief Jerome Powell to Congress and the widely-watched monthly jobs report.

At 06:50 ET (11:50 GMT), the Dow futures contract was down 40 points, or 0.1%, S&P 500 futures traded 5 points, or 0.1% lower, and Nasdaq 100 futures dropped 14 points, or 0.1%.

The main equity indices enjoyed a positive week last week, with the blue-chip Dow Jones Industrial Average adding 1.8%, the broad-based S&P 500 gaining 1.9%, and the tech-heavy Nasdaq Composite soaring 2.6%.

Investors appear to have come to some sort of acceptance that the Federal Reserve will likely keep interest rates higher for longer, given the recent equity gains and the series of hawkish comments from policymakers.

San Francisco Federal Reserve Bank President Mary Daly added to the message on Saturday, stating that "in order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary."

However, the central bank using the recent strong economic data to go back to jumbo hikes would likely prompt another bout of hefty selling on Wall Street.

This means the market’s focus is firmly on Fed Chair Powell's two-day testimony before the U.S. Congress, starting on Tuesday, and then Friday’s monthly jobs report as these will likely dictate expectations of the Fed’s policy at its next meeting later this month.

“The market will be interested to hear what he thinks about re-accelerating the pace of hikes to 50 bp from 25 bp (+30 bp is priced for the 22 March meeting) and any indication on what the terminal rate might be,” said analysts at ING, in a note.

In corporate news, the quarterly earnings season is coming to a close, with all but seven of the companies in the S&P 500 having reported.

Elsewhere, Tesla (NASDAQ:TSLA) stock edged higher in premarket trading on Monday after the electric car maker announced fresh price cuts to some of its premium models.

Its website indicated that the company had cut its price for the Model S by around 4% and the more expensive Model X by around 9%.

Apple (NASDAQ:AAPL) stock gained over 1% premarket after influential investment bank Goldman Sachs initiated coverage of the iPhone maker with a ‘buy’ rating, saying it can rally more than 30% from current levels.

Oil prices retreated Monday after China set a lower-than-expected target for economic growth this year, disappointing traders who were banking on strong growth from the largest crude importer in the world to boost crude demand.

By 06:50 ET, U.S. crude futures traded 1.5% lower at $78.50 a barrel, while the Brent contract fell 1.5% to $84.55.

Additionally, gold futures fell 0.1% to $1,853.95/oz, while EUR/USD traded flat at 1.0632.

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