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Futures fall as investors await more data before Fed meet

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(Reuters) – U.S. stock index futures fell on Monday as investors awaited more data, including a report on the services sector, to gauge the Federal Reserve’s next move at its rate-setting meeting later this month.

All major Wall Street indexes notched a second straight week of gains last week, with the S&P 500 rising 1.13%, the Dow gaining 0.24% and the Nasdaq climbing 2.1%.

But near the end of the week, equities lost some momentum after November’s robust U.S. payrolls report challenged hopes for a less aggressive Fed.

Investors see a 91% chance that the U.S. central bank will increase the interest rates by 50 basis points next week, with the rates peaking in May 2023. [FEDWATCH]

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The rate-setting Federal Open Market Committee meets on Dec. 13-14, the final meeting in a volatile year, which saw the central bank attempt to arrest a multi-decade rise in inflation with record interest rate hikes.

The aggressive policy tightening has also triggered worries of an economic downturn, with JPMorgan, Citigroup and BlackRock among those that believe a recession is likely in 2023.

A report from the Institute of Supply Management is expected to show that the services sector grew at a slower pace in November, compared with the prior month.

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The data is due at 10 a.m. ET and will come on the heels of a survey last week that showed manufacturing activity contracted for the first time in 2-1/2 years last month as higher borrowing costs weighed on demand for goods.

In other economic data this week, investors will also monitor monthly factory orders, weekly jobless claims, producer prices and the University of Michigan’s consumer sentiment survey for more clues on the health of the U.S. economy.

At 6:01 a.m. ET, Dow e-minis were down 139 points, or 0.4%, S&P 500 e-minis were down 17.75 points, or 0.44%, and Nasdaq 100 e-minis were down 33.75 points, or 0.28%.

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Shares of Tesla Inc fell 1.7% in premarket trading on the electric vehicle maker’s plans to cut December output of the Model Y at its Shanghai plant by more than 20% from the previous month.

U.S.-listed Chinese stocks such as Alibaba Group and JD.com gained about 5.2% each. Reuters reported China was set to announce the further easing of some of the world’s toughest COVID curbs as early as Wednesday.

(Reporting by Shubham Batra in Bengaluru; Editing by Anil D’Silva)

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