Futures muted as Fed caution sets in, JPMorgan to buy First Republic

NEW YORK: U.S. stock index futures were muted on Monday as investors refrained from taking big bets ahead of the Federal Reserve's policy decision this week, while regulators said JPMorgan will buy most of the beleaguered First Republic Bank's assets.

JPMorgan Chase & Co's shares rose 3.7% in premarket trading after the deal was announced early on Monday, while First Republic's stock slumped almost 46% to $1.9 before trading in it was suspended.

Shares of First Republic's regional peers PNC Financial and Citizens Financial slipped 2.3% and 1.4%, respectively, while other big banks including Bank of America edged higher.

The rescue comes less than two months after a deposit flight from U.S. lenders Silicon Valley Bank and Signature Bank forced the Fed to step in with emergency measures to stabilize markets.

First Republic's woes kicked off last week on a bleak note, but upbeat earnings from Alphabet Inc, Microsoft Corp and Meta Platforms Inc helped the benchmark S&P 500 notch its second consecutive month of gain on Friday.

Analysts now expect first-quarter earnings for S&P 500 companies to fall 1.9% from a year earlier, compared with a 5.1% fall expected at the start of April, according to Refinitiv data. Apple Inc is set to report later this week.

Investors are keenly awaiting the conclusion of the Fed's two-day policy meeting on Wednesday for signs that its aggressive monetary policy tightening is coming to an end soon.

Recent economic data has reinforced bets of another 25-basis point interest rate hike, with investors pricing in 90% chances of such a move, according to CME Group's FedWatch tool.

Investors will also focus on Jerome Powell's press conference to assess if the Fed's commentary pushes back market expectations of rate cuts before the year-end amid the recent banking turmoil and threats of an imminent recession.

"While the market has priced in another hike this week, we think the developments over the weekend will cause the FOMC to be more prudent with their guidance and respect the message of the market," said Thomas Hayes, chairman and managing member at Great Hill Capital.

"We would not be surprised to see a "pause" after this final hike. Markets should take today's news in stride knowing that the repeated bank failures should now have the Fed back on its heels and defanged moving forward."

At 7:50 a.m. ET, Dow e-minis were down 14 points, or 0.04%, S&P 500 e-minis were down 3.75 points, or 0.09%, and Nasdaq 100 e-minis were down 13.5 points, or 0.1%.

Manufacturing data from the Institute for Supply Management and S&P Global for April and the Commerce Department's construction spending for March will be released later in the day, offering investors more clues on the state of the economy.

Among earnings-driven moves, Norwegian Cruise Line Holdings rose 2.7% after the cruise operator raised its full-year profit forecast, betting on higher pricing and pent-up demand from wealthy customers.

ON Semiconductor Corp, MGM Resorts International and Franklin Resources Inc are some of the major companies reporting quarterly results before the opening bell.