Futures edge higher at start of data-heavy week

(Reuters) – Futures for the main U.S. indexes were slightly higher on Monday, after several weeks of gains, as investors awaited key inflation figures this week to gauge the likelihood of interest rate cuts this year.

On Friday, the S&P 500 and Nasdaq Composite registered their third week of gains in a row for the first time since January, while the Dow posted its biggest weekly gain since mid-December.

The indexes were also trading near their peaks, boosted by stronger-than-expected earnings reports and signs of a cooling U.S. labor market that fueled bets of one or two rate cuts by the U.S. Federal Reserve this year.

Investors will focus on a spate of economic readings this week, including monthly producer and consumer prices, retail sales and weekly jobless claims.

The keenly awaited inflation data on Wednesday is expected to show that core consumer prices rose 0.3% on a month-over-month basis in April, for an annual rise of 3.6%, according to economists forecasts in a Reuters poll.

“After upside surprises in the first quarter, markets will focus on service inflation excluding shelter and energy services,” said Ronald Temple, chief market strategist at Lazard.

“After core CPI increased by 36 bps in March, I expect any increase of a similar or larger size to provoke a negative market reaction while any material downside surprise will elicit relief and raise the probability of additional Fed rate cuts by year-end.”

While Fed policymakers in recent days have reassured markets that the next move is not a rate rise, the timing of the first rate cut remains uncertain. Cleveland Fed President Loretta Mester is scheduled to speak later in the day.

Traders are currently pricing in rate cuts of 42 bps from the Fed by the end of 2024, according to LSEG’s rate probabilities app, with odds for a September rate cut at 49%.

Major companies reporting this week include Home Depot, Walmart, Cisco and Alibaba.

Of the 459 S&P 500 companies that reported through Friday, 77.3% beat analysts’ profit estimates, according to LSEG data. The long-term average is 66.7%.

By 05:37 a.m. ET, S&P 500 e-minis were up 6.25 points, or 0.12%. Nasdaq 100 e-minis rose 39.5 points, or 0.22%, and Dow e-minis climbed 24 points, or 0.06%

Alphabet slipped 1.8% premarket as Microsoft-backed OpenAI looked set to announce its artificial intelligence (AI)-powered search product on Monday. Microsoft edged up 1.1%.

Arm Holdings climbed 2.6% after Nikkei Asia reported the SoftBank Group’s-backed chip designer plans to develop AI chips, seeking to launch the first products in 2025.

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Meme stock GameStop’s shares rallied 21.2%, on top of a 57% jump so far in May, while AMC Entertainment added 6.9%.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Devika Syamnath)