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(Reuters) – U.S. stock index futures slipped on Friday, a day after the benchmark S&P 500 marked a 20% rally from lows, while inflation data and U.S. monetary policy decision due next week kept investors on their toes.

The S&P 500 has risen 20% from its Oct. 12 closing low, heralding the start of a new bull market, as defined by some market participants.

The Nasdaq and S&P 500 have notched new year-to-date highs in recent sessions, boosted by an AI-driven rally in megacap stocks, a better-than-expected earnings season and expectations that the Fed is nearing the end of its rate-hiking cycle.

Fed fund futures are pricing in a 76% chance that the U.S. central bank will hold interest rates at the current 5%-5.25% range at its June 13-14 policy meeting, according to CMEGroup’s Fedwatch tool.

Consumer prices data on Tuesday will be key to shaping expectations around further moves by the Fed, with traders anticipating a 50% chance of a 25-basis-point-rate hike in July.

Signs of a resilient U.S. economy and hopes of the Fed pausing its aggressive monetary tightening have pushed volatility gauges tumbling. The CBOE Volatility index, commonly known as Wall Street’s fear gauge, sank to a fresh pre-pandemic low of 13.53 points on Thursday.

“We think the June decision will be a close call. The risk is that Fed Chair Jerome Powell fails to appease the hawks, and the committee ends up hiking in both June and July,” economists at BNP Paribas noted.

“We expect the Fed to hike one last time in this cycle in July. By September, we think weakening activity and employment data will lead toward a more enduring pause, with the Fed holding at 5.5% until its first rate cut in March 2024.”

Yield on the two-year Treasury notes, most reflective of short-term rate expectations, resumed its rise to trade at 4.55%, pressurizing high-growth stocks.

Apple Inc, Amazon.com Inc and Microsoft Corp slipped in premarket trading.

Tesla Inc shares rose 4.4% after General Motors said it would adopt Tesla’s North American charging plug standard and give GM’s electric vehicle buyers access to the Tesla Supercharger network. GM shares climbed 3.7%.

Shares of charging companies EVgo and ChargePoint fell more than 4%.

At 5:58 a.m. ET, Dow e-minis were down 75 points, or 0.22%, S&P 500 e-minis were down 6.25 points, or 0.15%, and Nasdaq 100 e-minis were down 5.75 points, or 0.04%.

Among other stocks, Target Corp slipped 1.2% after Citi downgraded the big-box retailer to “neutral”, saying sales could fall further this year amid a challenging macro backdrop.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Vinay Dwivedi)

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