Futures slip as Fed's rate-cut uncertainty looms; Tesla dips

LONDON: Futures tracking Wall Street's main indexes declined on Wednesday, dragged by Tesla shares, with investors scrutinizing corporate earnings and a pushback from policymakers against expectations of an early start to interest-rate cuts.

Tesla (TSLA.O), opens new tab lost 1.4% in premarket trading after the electric-vehicle maker slashed the prices of its Model Y cars in Germany, a week after reducing prices for some China models.

Halfway into the first month of 2024, Wall Street's near-14% rally in the last two months of 2023 is losing steam as U.S. central bankers continue to downplay market expectations for a quick start to the monetary-policy-easing cycle, while data on the economy's performance appears mixed.

Other major central-bank policymakers have also actively snubbed such expectations, weighing on the global risk appetite. European Central Bank President Christine Lagarde noted that the battle against inflation had not yet been won, while Dutch central bank chief Klaas Knot said the ECB rate-cut bets were excessive and possibly self-defeating.

Still, traders remain committed to their expectations of an at least 25-basis-point rate cut by the U.S. Federal Reserve in March. As per the CME Group's FedWatch Tool, bets of such a move stand at 60%, down from over 80% at the end of 2023.

The CBOE Market Volatility Index (.VIX), opens new tab, a market fear gauge, rose to an over two-month high of 14.74 points during the day.

On tap are the retail sales and industrial production data for December, due before market open, and the release of the "Beige Book", a snapshot of the U.S. economy, at 2:00 p.m. ET.

"Improving consumer demand may translate not only into healthier economic growth, but into concerns about stickier inflation in the months to come," said Charalampos Pissouros, senior investment analyst at XM.

A number of Fed officials are also expected to speak on Wednesday, including Fed Vice Chair for Supervision Michael Barr, Fed Board Governor Michelle Bowman and New York Fed President John Williams. Their remarks will be parsed for clues on the timing of the rate cuts.

After reporting fourth-quarter earnings on Tuesday, CEOs of investment banking giants expressed optimism about a resurgence in capital markets, on an improving U.S. economy and deals pipeline, but also warned of risks that could disrupt the nascent recovery.

At 7:16 a.m. ET, Dow e-minis were down 129 points, or 0.34%, S&P 500 e-minis were down 17 points, or 0.35%, and Nasdaq 100 e-minis were down 74.5 points, or 0.44%.

Futures tracking the small-cap Russell 2000 index also dropped 1% after the index hit a more than one-month low on Tuesday.

Among other movers, U.S.-listed shares of Chinese firms such as Alibaba , Xpeng and Bilibili dropped between 2.9% and 7.3%, after China data showed the local economy's recovery appeared shakier than expected.

Spirit Airlines (SAVE.N), opens new tab slid 14.5% following a plunge in the previous session, after a U.S. judge blocked JetBlue (JBLU.O), opens new tab from acquiring the carrier.

Albemarle(ALB.N), opens new tab gained 1.3% on plans to reduce costs by around $95 million, through headcount reductions and capital expenditure cuts this year. Meanwhile, it is also trying to sell its stake in Australia's Liontown Resources (LTR.AX), opens new tab.

Ford Motor (F.N), opens new tab lost 1.7% on a report of UBS downgrading the stock.