Stock Futures Rise as Fed Meeting Approaches

Stock Market Overview and Futures Performance

U.S. stock futures rose on Monday, with the S&P 500 and Nasdaq showing gains in premarket trading, as investors awaited the Federal Reserve's interest rate decision. The SPDR S&P 500 ETF (SPY) was up 0.26%, trading at $659.11, while the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, advanced 0.19% to $587.76. This comes after a mixed close on Friday, with consumer discretionary and utilities sectors providing some support despite losses in industrials and healthcare stocks.

Meanwhile, Nvidia's shares dropped 2% premarket following news of a preliminary antitrust investigation by Chinese regulators. The investigation centers around Nvidia's prior acquisition of an Israeli networking technology firm, reflecting escalating U.S.-China tensions amid ongoing trade discussions. This regulatory action could weigh heavily on the semiconductor sector, which has been a leading driver of market gains this year.

Economic Data and Investor Sentiment

The Empire State Manufacturing Survey revealed a sharp decline in New York State's manufacturing activity for September. The general business conditions index dropped 21 points to -8.7, moving back into negative territory for the first time since June. The downturn was primarily driven by significant reductions in new orders and shipments, although employment levels remained stable.

Despite recent gains in major equity indices, investor sentiment has grown increasingly bearish. The latest American Association of Individual Investors (AAII) Sentiment Survey showed bearish sentiment rising to 49.5%, the highest level since early May. This marks a stark increase from the previous week’s 43.4%. Concerns over inflation, labor market conditions, and uncertainty surrounding Federal Reserve policy decisions appear to be fueling this cautious outlook.

Federal Reserve Meeting and Market Implications

As the Federal Reserve begins its two-day policy meeting, markets are overwhelmingly pricing in a 25-basis-point interest rate cut, with CME FedWatch Tool assigning a near 100% probability to this outcome. The move is expected to address signs of a weakening labor market and tame inflationary pressures. However, some analysts worry about the potential for long-term inflationary risks if the Fed pivots too early.

Apollo Global Management has drawn parallels between current inflation trends and the 1970s, highlighting the risk of a "double peak" inflation scenario. While initial price surges were contained, a premature policy shift could lead to a second inflationary spike. This, coupled with mixed economic data and tepid capital spending plans, underscores the complexity of the Fed's decision-making process. Markets will closely monitor Chair Jerome Powell's press conference for insights into future rate cut trajectories and the Fed's broader economic outlook.