S&P500 Futures Outlook: Fed’s Rate Policy and Job Data Keep Traders on Edge

S&P 500 E-mini Futures Drift Lower as Traders Await Key Data

E-mini S&P 500 futures edged lower on Tuesday, trading just beneath the all-time high of 5830.00. While the broader market remains in an uptrend, recent sessions have seen tentative buying after a significant rally on September 19.

We see potential near-term weakness, with technical indicators suggesting a drop toward a key pivot at 5642.50 and possibly to the 50-day moving average at 5617.62. This caution comes as traders eye upcoming data releases and weigh the Federal Reserve’s future policy moves.

At 12:46 GMT, Dow futures are trading 42522.00, down 121.00 or -0.28%. S&P 500 Index futures are at 5808.00, down 6.25 or -0.11% and Nasdaq futures are trading 20258.50, down 2.75 or -0.01%.

Fed’s Rate Outlook Supports Markets, But Risks Remain

S&P 500 futures opened the fourth quarter relatively flat following a stronger-than-expected September, with all major indices finishing the month in positive territory. This marked the first positive September for the S&P 500 since 2019, bucking historical trends that often see stocks struggle during this period.

The recent strength has been attributed to the Federal Reserve’s dovish stance, as Chair Jerome Powell signaled the potential for two more rate cuts by year-end, each by 25 basis points, contingent on economic performance.

Despite the optimism, some market strategists caution that the Fed’s half-point rate cut at its last meeting could indicate more underlying economic softness than previously anticipated.

Dave Sekera, chief U.S. market strategist at Morningstar, highlighted the risk of weaker job growth and rising unemployment, which could create downside pressure on stocks. This concern will likely be tested with the release of September’s nonfarm payrolls report, a key event for investors in the coming days.

Corporate Movers: CVS, Stellantis, Ford Among Top Headlines

In corporate news, CVS shares rose 2% in premarket trading after reports of a strategic business review, as the company faces potential activist investor pressure. Meanwhile, Stellantis shares continued to decline, down over 1%, following an announcement that the automaker would extend production halts on electric Fiat 500s due to weak demand. On the flip side, Ford Motors jumped 2.3% after Goldman Sachs upgraded the stock to a buy, citing potential growth in the automaker’s software and services offerings.

Other stocks in focus include Disney, which slipped nearly 1% after a downgrade from Raymond James, and Anheuser-Busch InBev, which rose 1.5% on an upgrade from Citi. Analysts expect the beverage giant to announce a $1 billion share buyback program soon, bolstering investor confidence.

Economic Events and Key Data Releases Ahead

Traders are also closely monitoring the ongoing strike by the International Longshoremen’s Association, which could have significant economic repercussions if prolonged. Additionally, investors await the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) for August and key manufacturing data from the S&P Global and ISM reports.

Market Forecast: Potential for Short-Term Pullback

With technical indicators pointing to resistance just below record highs and concerns about economic softness lingering, the near-term outlook for the S&P 500 suggests a possible pullback. While the market has shown resilience, traders should be cautious of downside risks, particularly ahead of critical employment data later this week.

A break below the 50-day moving average at 5617.53 could signal further weakness, especially if the nonfarm payrolls report disappoints. However, continued dovish signals from the Fed could provide support, limiting the downside.