U.S. stock futures fell early Monday to start a new month for the stock market, as investors began December hotly anticipating the next decision on interest rates from the Federal Reserve.
Dow Jones Industrial Average futures dropped 240 points, or 0.5%, after the index finished an abridged day of trading on Black Friday up 289 points to 47,716. S&P 500 futures lost 0.7% with contracts tracking the tech-heavy Nasdaq Composite down 0.8%.
After a strong end to November, which saw the S&P 500 and Nasdaq record their best Thanksgiving weeks since 2008, it looks like a risk-off tone to start December.
Expectations of whether the Fed will cut interest rates this month remain front of mind for investors. The central bank’s rate decision will follow its Dec. 9-10 policy meeting, with the odds of a quarter-point rate cut rising above 80% last week and climbing to 88% on Monday. Rising odds of a rate cut helped stocks rally into the end of last month after initially selling off in November.
“November was very much a month of two halves: risk assets initially sold off, before a sharp recovery meant the S&P 500 just about posted a seventh consecutive monthly gain,” Jim Reid, a strategist at Deutsche Bank, wrote in a note.
“The main driver was the Fed, as investors first priced out and then back in a December rate cut. Elsewhere, fears of an AI bubble remained prominent.”
A flurry of economic data in the days ahead will be key for investor expectations on rates as the Fed meeting approaches.
Investors will watch for the ISM manufacturing index on Monday alongside remarks from Fed Chairman Jerome Powell due later in the day.
Wednesday brings the ADP employment report for September, which “will take on added significance as it will be the most up-to-date labor market data available to Fed officials,” said Reid.
Wednesday also sees numbers on industrial production as well as the ISM services index. Friday brings the release of the core personal-consumption expenditures (PCE) report, which is the Fed’s preferred measure of inflation, although the government shutdown has delayed data releases, with this report covering the September period.