Futures eased on cautious start to Fed meeting week By Reuters

By Johann M Cherian and Purvi Agarwal

(Reuters) – U.S. stock index futures were lower on Monday as caution prevailed ahead of the Federal Reserve’s key monetary policy decision later in the week, with investors expecting a sharp cut in borrowing costs.

Since Fed Chairman Jerome Powell hinted at a future rate cut late last year, markets have seen a rout, with the index and the Dow now near record highs.

However, following a mixed batch of economic data and comments from a former policymaker over the past few weeks, traders have hedged their bets on what decision the central bank will reach during its September 17-18 meeting.

Odds for a 50-basis-point cut are 59%, up from 30% a week ago, according to the CME FedWatch tool, which showed a 41% probability of a 25-basis-point cut. There is concern that an excessive move could mean the Fed sees the economy cooling at a faster pace.

“Just as important as the 25 vs. 50 debate will be the communication from the Fed. Would a 50 bps be the early 50s or a higher move to start the cycle? be a lot to digest,” a group of Deutsche Bank strategists led by Jim Reid said in a note.

The benchmark index and the tech-heavy Nasdaq posted 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 07:00 ET, the Dow E-mini was up 85 points, or 0.21%, the S&P 500 E-mini was up 2 points, or 0.03%, and the E-mini was down 38.5 points or 0.20%.

Small-cap futures, which tend to do well with lower borrowing costs, outperformed with a 0.72% gain. The index has gained more than 7 percent so far this year and hit its highest level in more than a week on Friday.

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

Among rate-sensitive growth stocks, Nvidia (NASDAQ: ) fell 0.9%, while Meta (NASDAQ: ) rose 0.15% and Tesla (NASDAQ: ) rose 0.44% in pre-market transactions.

Intel Corp (NASDAQ: ) rose 2% after a report showed the chipmaker officially qualified for up to $3.5 billion in federal subsidies to make semiconductors for the U.S. Department of Defense.

Trump Media & Technology added 3.7 percent after an apparent second assassination attempt on the Republican nominee and former president on Sunday, weeks before the closely watched U.S. presidential election.

Crypto stocks trended lower, with Microstrategy (NASDAQ: ) down 2.2% and Riot Platforms (NASDAQ: ) off 1.5%, tracking a 2% drop in bitcoin prices.

Alcoa (NYSE: ) gained 1.4% after the aluminum producer said on Sunday it would sell a 25.1% stake in its joint venture with Saudi Arabia’s Ma’aden for $1.1 billion.