By Peter Bergman (MoneyAmped.com)
U.S. stock futures slightly declined on Tuesday as Wall Street anticipates a significant Federal Reserve policy announcement and new inflation data this week. Apple (NASDAQ: AAPL) announces a fresh collaboration with OpenAI, the creator of ChatGPT, as the tech giant aims to strengthen its foothold in the competitive field of integrating artificial intelligence into its products.
Stock Market Futures Show a Slight Decline
U.S. futures remained just below the neutral mark on Tuesday as investors exercised caution in anticipation of a crucial Federal Reserve interest rate decision and significant monthly inflation data later this week.
At 03:46 ET (07:46 GMT), the Dow futures contract decreased 31 points or 0.1%, S&P 500 futures declined 3 points or 0.1%, and Nasdaq 100 futures dropped 17 points or 0.1%.
On Monday, the S&P 500 and Nasdaq Composite reached new closing highs, boosted in part by the highly anticipated stock split of Nvidia (NASDAQ: NVDA), a prominent player in artificial intelligence. As reported by Reuters, there has been much talk about whether Nvidia’s move will eventually lead to its inclusion in the prestigious Dow Jones Industrial Average.
Markets are eagerly anticipating Wednesday, as it marks the conclusion of the Fed’s latest two-day policy meeting and the release of the May reading of the consumer price index by the U.S. Bureau of Labor Statistics. This index is closely watched as it provides valuable insights into inflation in the world’s largest economy.
Apple Collaborates With OpenAI
Apple has revealed a collaboration with OpenAI. The tech giant will integrate the ChatGPT chatbot developed by the start-up into its range of products.
The announcement, unveiled at Apple’s yearly developers conference on Monday, arrives as the tech behemoth aims to bolster its artificial intelligence capabilities in response to the growing excitement surrounding this emerging technology.
Before the event, investors wondered if Apple would introduce innovative AI capabilities, primarily as it aims to catch up with its major competitors in the tech industry. Tim Cook, the CEO, expressed great enthusiasm for the innovative “Apple Intelligence” system. This cutting-edge technology harnesses the power of artificial intelligence to enhance Siri, the voice assistant, and provide users with highly tailored experiences. Cook views this as a significant milestone for the company, marking a major leap forward.
Nevertheless, Apple’s stocks experienced a 1.9% decline on Monday, following a previous surge. This indicates a tepid reaction from Wall Street analysts who had anticipated a more impressive AI update.
Analysts at UBS believe that the absence of an innovative AI product introduction or software suite could negatively impact the demand for iPhones in the near future and the overall sentiment among investors.
Fed to Cut Rates Just Once in 2024
According to the Financial Times, the Federal Reserve is expected to reduce interest rates only once this year, as there are signs of persistently high inflation.
According to the report, more than half of the 39 experts who took part in a poll conducted by FT-Chicago Booth anticipate that the central bank will announce a single 25-basis-point reduction in 2024. Approximately 25% indicated that they expect no decrease in rates whatsoever.
The survey coincides with the upcoming release of the Federal Open Market Committee’s latest “dot plot” on Wednesday. This plot provides insights into officials’ projections for future changes in borrowing costs. Market forecasts indicate that policymakers are expected to reduce the projected number of interest rate cuts for the current year.
Meanwhile, experts predict that the Federal Reserve will maintain interest rates at their current level of 5.25% to 5.5% after their most recent policy meeting. Some officials have recently indicated that they require additional evidence of a slowdown in inflation, specifically to their target level of 2%, before considering any rate reductions.
Oil Prices Decline
Oil prices slightly declined on Tuesday, with traders preparing for the Fed decision and new U.S. inflation figures.
By 03:51 ET, Brent oil futures had slightly declined, with a decrease of 0.1% to $81.55 per barrel. Similarly, West Texas Intermediate crude futures experienced a slight dip of 0.1% to $77.29 per barrel. Prices reached a peak last Monday due to expectations of increased demand during the critical summer travel season in the U.S. However, analysts cautioned that this optimism may have been excessive.
The result of the Federal Reserve’s two-day meeting and the inflation figures may impact how markets perceive the future trajectory of interest rates in the coming months. The possibility of elevated borrowing costs for an extended period could dampen demand.
China’s macroeconomic data, released on Wednesday, may influence the outlook for demand in the world’s largest oil importer.
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