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Equities have been going through a rough patch in August, with the S&P 500 languishing at a more than one-month low as data underscoring sticky inflation and a robust economy has fanned fears of interest rates staying higher for longer.
Wall Street closed sharply lower on Tuesday after solid retail sales growth in July added to uncertainty around the interest rate outlook, with concerns over a possible downgrade of several U.S. lenders by Fitch further denting risk sentiment.
While investors largely expect the Fed’s monetary tightening to be nearing its end, worries linger the central bank could hold rates at the current level for longer.
Traders’ bets of a rate hike pause in September stand at nearly 91%, according CME Group’s Fedwatch tool.
Investors are now focused on the Federal Reserve’s July 25-26 meeting minutes, due at 1400 ET (1800 GMT). The central bank had raised rates by 25 basis points at the end of the meeting and had signaled its next policy moves would be dependent on fresh economic data.
“Recent commentary from several FOMC (Federal Open Market Committee) policymakers would appear to suggest growing splits between those who think that a lengthy pause is appropriate now, and those who want further tightening,” said Michael Hewson, chief market analyst at CMC Markets in a note.
“It will be interesting to see whether these come to the fore in the minutes.”
The yield on the two year Treasury note, which best reflects short-term rate expectations, eased to 4.9%, offering some support to megacap growth stocks whose valuations take a hit when interest rates rise.
Nvidia (NASDAQ:NVDA) rose nearly 1% in premarket trading after Piper Sandler became the latest Wall Street brokerage to raise its price target on the stock ahead of the chip designer’s earnings next week.
Tesla (NASDAQ:TSLA) slid 1.5% after the electric-car maker cut prices for its premium Model S and Model X cars in China by more than 6%.
Investors will also monitor quarterly earnings from U.S. retail giant Target (NYSE:TGT) due before the opening bell, as well as data on industrial production and housing starts later in the day.
At 5:26 a.m. ET, Dow e-minis were up 32 points, or 0.09%, S&P 500 e-minis were up 2.75 points, or 0.06%, and Nasdaq 100 e-minis were up 13.75 points, or 0.09%.
Among other stocks, U.S.-listed shares of Tower Semiconductor (NASDAQ:TSEM) dropped 11.1% in premarket trading, after Intel (NASDAQ:INTC) terminated its plans to acquire the Israeli contract chipmaker.
