U.S. Stock Futures Lower as Fed Decision and Inflation Data Loom

U.S. stock futures edged lower on Monday, as investors brace for a crucial week marked by the Federal Reserve's interest rate decision and key inflation data. Additionally, news of Elliott Investment Management taking a significant stake in Southwest Airlines has caught market attention.

1. Futures Lower

U.S. stock futures indicated a weaker start to the week, with Dow futures down 87 points, or 0.2%, S&P 500 futures slipping 6 points, or 0.1%, and Nasdaq 100 futures falling by 43 points, or 0.3% as of 03:46 ET (07:46 GMT). This follows a volatile prior session where a stronger-than-expected jobs report raised concerns about the Fed delaying rate cuts longer than anticipated. Despite this, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all posted weekly gains.

2. Fed Decision This Week

The Federal Reserve is widely expected to maintain current borrowing costs at over two-decade highs during its policy meeting concluding on Wednesday. The focus will be on any signals regarding future rate changes, particularly in the updated dot plot, which is expected to indicate two 25-basis point cuts this year, down from three projected in March.

Several Fed officials have emphasized the need for more evidence of sustained cooling in inflation towards the 2% target before initiating rate cuts. While price gains have moderated following aggressive rate hikes starting in 2022, they remain above the target level.

3. May Inflation Data Due Out This Week

New U.S. inflation data is set to be released just hours before the Fed's decision on Wednesday. Economists expect annualized headline inflation for May to match the previous month's pace but show a slowdown on a monthly basis. The core inflation rate, excluding volatile items like food and fuel, is projected to decelerate slightly year-on-year while remaining consistent with April's month-on-month rate.

These figures will be crucial for Wall Street, offering insights into the Fed's potential policy path later in the year. According to CME Group's FedWatch Tool, there is currently about a 53% chance that the Fed will begin lowering rates from 5.25% to 5.5% as early as September.

4. Elliott Takes Almost $2 Billion Stake in Southwest Airlines - WSJ

Elliott Investment Management has acquired nearly $2 billion in Southwest Airlines shares and plans to push for changes to improve the carrier's performance, as reported by the Wall Street Journal on Sunday. This move makes Elliott one of the largest shareholders in Southwest, whose stock has fallen nearly 4% in 2024 and remains below its pre-pandemic level from March 2020.

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