REUTERS: Wall Street was set to open higher on Tuesday, bouncing back from a selloff in technology stocks a day earlier, after a senior Federal Reserve official pointed the way to a cut in interest rates in response to slowing economic growth.
St. Louis Fed President James Bullard said late on Monday that a rate cut “may be warranted soon”, driving Fed funds futures to price in a 67per cent chance the central bank would reduce key short-term borrowing costs at its July policy meeting.
That would provide a fillip to Wall Street, whose three main indexes have shed at least 6per cent in May following a sudden flare up in trade tensions and Washington’s threat to slap tariffs on Mexican goods.
“There is a positive view that the rates are going to be low for longer periods or the Fed may even cut rates,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
“We’ve seen that when Fed is more likely to cut short-term interest rates the markets rally in relief.”
Investors will be paying close attention to Fed Chairman Jerome Powell’s speech before a monetary policy conference in Chicago later in the day for his economic outlook.
Futures nudged higher after China’s commerce ministry said the differences and frictions between China and the United States should be resolved through dialogue and negotiations.
Adding to the positive mood, Mexican Foreign Minister Marcelo Ebrard said he expects to find common ground with U.S. officials in immigration and tariffs talks.
“There are hopes that tariffs on Mexico will not go into effect next week and the senate may intervene to prevent that from happening,” said Brown.
Shares of tariff-sensitive Boeing Co and Caterpillar Inc rose more than 1per cent each, while chipmakers were also higher in trading before the bell.
At 8:52 a.m. ET, Dow e-minis were up 188 points, or 0.76per cent. S&P 500 e-minis were up 20.5 points, or 0.75per cent and Nasdaq 100 e-minis were up 62.5 points, or 0.89per cent.
High-profile technology companies – Amazon.com, Apple Inc, Facebook Inc and Google-parent Alphabet Inc – were up between 0.4per cent and 1.1per cent after tumbling a day earlier on fears of being the targets of U.S. government antitrust regulators.
The Nasdaq has lost 10.2per cent since its May 3 all-time high, confirming a correction territory, while the S&P 500 is 7.6per cent away from its record high hit on May 1.
Among other movers, Tiffany & Co fell 2.0per cent after luxury jeweler cut its full-year profit outlook and blamed lower spending by tourists worldwide for missing quarterly same-store sales estimates.
Data at 10:00 a.m. ET is expected to show U.S. factory orders fell 0.9per cent in May, compared with a 1.9per cent rise a month earlier.
(Reporting by Medha Singh and Amy Caren Daniel; Editing by Anil D’Silva)
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