U.S. stock futures moved slightly higher early Tuesday after all the three major indices fell on the first trading of the week over concerns about future rate hikes by the Federal Reserve.
Futures tied to the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) were up 0.3% and 0.5%, respectively, as of 5.28 a.m. EST, Tuesday. Meanwhile, futures on the tech-heavy Nasdaq 100 (NDX) were up 0.11%.
After two straight weeks of gains, the major averages ended in the red on Monday. The Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq 100 declined 1.4%, 1.79%, and 1.73%, respectively, yesterday.
The stronger-than-anticipated readings from the Institute for Supply Management on the non-manufacturing sector and the Census Bureau’s October Factory orders data drove fears about a higher interest rate hike as the Federal Reserve’s monetary tightening is taking time to achieve the desired effect. Last week, Fed Chair Jerome Powell signaled that December’s rate hike would be smaller following four consecutive hikes of 75 basis points.
Investors are worried that continued rate hikes by the Fed might push the economy into a recession. Several U.S. companies have been reducing their headcount or freezing hiring amid stubbornly high inflation and macro challenges. Consumer staples behemoth PepsiCo (PEP) is reportedly considering laying off hundreds of employees in its North American snacks and beverage businesses.
Meanwhile, oil prices edged higher on early Tuesday, after declining 3.8% in the previous session over concerns of continued rate hikes by the Fed. The sanctions on Russian seaborne oil and further easing of China’s COVID restrictions are fueling the rise in Tuesday’s crude prices. Particularly, the prospects of higher demand in China following the easing of restrictions could be a major catalyst in the days ahead as the country is the world’s largest oil importer.
Coming to economic releases, the U.S. Bureau of Economic Analysis is expected to announce October’s trade deficit numbers today. Experts estimate October trade deficit to come in at $80 billion. Last month’s report revealed a sharp widening in the September trade deficit to $73.3 billion from $65.7 billion in August, reflecting the impact of a strong U.S. dollar and softening global demand on exports.