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Wall St set to open higher as investors eye inflation data, Fed verdict

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By Shristi Achar A and Sruthi Shankar

(Reuters) – U.S. stock index futures rose on Monday, setting Wall Street up for a fresh round of gains, while investors awaited inflation data and the Federal Reserve’s interest rate decision this week.

The U.S. Labor Department’s consumer price index reading on Tuesday, also the first day of the Fed’s meeting, is expected to show inflation cooled slightly in May but core prices are likely to have remained elevated.

Traders see a 79% chance of the central bank hold interest rates at the 5%-5.25% range on Wednesday, while pricing in a 53% chance of a 25-basis-point increase in July, according to the CME Fedwatch tool.

“The Fed is continuing to walk this very fine line between are we going to tighten too much and drive the economy into a recession or are we not going to tighten enough and keep inflation high,” said Melissa Brown, global head of applied research at Qontigo.

“Until we see several months of low or declining inflation, the headline number is still going to be above the 2% target that the Fed has set. The market does seem to think that rates are going to stay stable.”

The benchmark S&P 500 notched gains for a fourth straight week on Friday, building on a 20% rise from its October 2022 lows, heralding the start of a new bull market as defined by some market participants.

A rally in megacap stocks, better-than-expected quarterly earnings and hopes that the Fed might be nearing the end of its tightening cycle have caused indexes to rise in recent weeks.

Since last week, the rally has broadened beyond megacaps to include more economically sensitive sectors such as energy and industrials, and also small-cap stocks as data continues to show a resilient U.S. economy despite higher interest rates.

Goldman Sachs on Friday raised its year-end price target for the benchmark S&P 500 to 4,500 from 4,000, citing the broadening of the market rally.

The CBOE volatility index edged up after hitting pre-pandemic levels in the previous week, up 0.78 point to 14.61.

At 8:37 a.m. ET, Dow e-minis were up 39 points, or 0.12%, S&P 500 e-minis were up 12.25 points, or 0.28%, and Nasdaq 100 e-minis were up 73.25 points, or 0.5%.

Biogen shares rose 1.5% in premarket trading after a U.S. FDA panel of advisers unanimously backed its Alzheimer’s drug, Leqembi, raising hopes that a traditional approval for the treatment might not come with major new safety warnings.

Adobe shares gained 1.8% after Jefferies increased the Photoshop maker’s price target to $530, the second highest on Wall Street.

Oracle rose 4.0% as J.P. Morgan hiked its price target to $109, ahead of the cloud and enterprise software firm’s fourth-quarter results later in the day.

U.S.-listed shares of Nio added 4.5% after the Chinese EV maker slashed prices on its cars as lukewarm sales pressure the company.

Nasdaq Inc slid 9.3% after the exchange operator said it would buy Thoma Bravo-owned software firm Adenza for $10.5 billion.

(Reporting by Shristi Achar A and Sruthi Shankar in Bengaluru; Editing by Vinay Dwivedi)

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