Futures fall ahead of labor data; Powell signals modest rate cuts Reuters

(Reuters) – U.S. stock index futures were flat to slightly lower on Tuesday as investors awaited labor market data, a day after Federal Reserve Chairman Jerome Powell dismissed market expectations for huge reductions in interest rates.

At an economic conference on Monday, Powell reiterated that the central bank was likely to cut borrowing costs by another 50 basis points by the end of the year, based on data that pointed to robust consumer spending and gross domestic income.

Traders were on the fence about the size of future Fed rate cuts. They now price a 25bps cut to the November meeting at 62.7%, compared with 41.8% a week ago, according to CME Group’s (NASDAQ: ) FedWatch tool.

With inflation nearing the central bank’s 2 percent target, the focus is on the labor market as the Fed began easing monetary policy in September.

All eyes are on August’s job offers and the Labor Turnover Survey (JOLTS) due at 10 a.m. ET, along with the Institute for Supply Management’s final estimate for manufacturing activity in September.

“Given that Powell believes inflation has been conquered, a surprise in the employment reports could yet change the Fed’s course,” analysts at Rabobank said in a note.

“After all, it’s not predetermined. For example, very weak employment growth or a rise in the unemployment rate could still push the FOMC (Federal Open Market Committee) to cut by 50 bps.”

At 5:34 a.m. ET, the Dow E-minis were down 111 points, or 0.26%, the E-minis were down 5.25 points, or 0.09%, and the E-minis were up 15 points, or 0.07%.

Commentary from policymakers, including Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin, Boston Fed President Susan Collins and Governor Lisa Cook, will be looked at for their insights into the economy and outlook for monetary policy.

Wall Street’s three main indexes closed September higher, bucking a historical trend in which stocks performed poorly during the month on average. The benchmark S&P 500 and the blue-chip Dow posted their fifth straight month of gains and closed near record highs in the previous session.

Markets also monitored a port strike on the East Coast and Gulf Coast, halting the flow of about half of the nation’s shipping. Shares of Designer Brands (NYSE: ), Costco (NASDAQ: ), Walmart (NYSE: ) and CH Robinson (NASDAQ: ) were little changed in premarket trading.

CVS Health (NYSE: ) added 2.3% after a report showed the healthcare firm is exploring options that could include a breakup of the company to separate its retail and insurance units.

Tesla (NASDAQ: ) was flat before reporting third-quarter deliveries on Wednesday, with analysts expecting an 8% rise from a year ago.