On Feb 27, Wall Street was poised for a muted start as market participants awaited an important inflation report among other economic indicators, which are expected to influence the Federal Reserve’s decisions on interest rate adjustments and assess the sustainability of the recent market rally.

Attention returns to the Federal Reserve’s plans for monetary policy following last week’s intense interest in artificial intelligence (AI), which overshadowed the anticipation of delayed interest rate reductions, propelling the S&P 500 and Dow Jones to new highs.

This week’s spotlight is on Thursday’s announcement of the personal consumption expenditures price index (PCE) for January, the Federal Reserve’s favored measure of inflation.

Should the PCE report indicate persistent inflation, mirroring recent consumer and producer price data, it might affect the Federal Reserve’s policy decisions and lead market participants to adjust their expectations for rate cuts this year.

At present, 63% of investors anticipate the Federal Reserve to begin reducing rates by June, a decrease from nearly 98% at January’s end, as per CME Group’s FedWatch tool. Expectations for a rate cut in July are at 83.6%.

Peter Andersen, the founder of Andersen Capital Management in Boston, remarked, “Investors are gradually accepting that the Federal Reserve may not lower rates in the near future.”

Andersen added that the hope for a ‘soft landing’—where the Federal Reserve manages to control inflation without significantly harming the economy—is bolstering market optimism.

“I anticipate the upcoming PCE report to be positive, suggesting further momentum towards a soft landing.”

Upcoming reports on the gross domestic product (GDP), unemployment claims, and manufacturing activity, along with a consumer confidence survey scheduled for release after Tuesday’s market opening, will provide additional insights into the potential timing of interest rate reductions.

Comments from Federal Reserve policymakers, including voting members Atlanta Fed President Raphael Bostic, New York Fed President John Williams, and Fed Board Governor Christopher Waller, who are due to speak this week, are also highly anticipated by investors.

This week’s congressional debate over government funding will also be closely watched. Major credit rating agencies have warned that repetitive last-minute debt ceiling negotiations are affecting the creditworthiness of the United States, which has accumulated over $34 trillion in debt.

As of 8:31 a.m. ET, Dow e-minis were down by 26 points, or 0.07%, S&P 500 e-minis had risen by 1.5 points, or 0.03%, and Nasdaq 100 e-minis were up by 21.75 points, or 0.12%.

Tesla saw a notable premarket increase of 2.1%, outperforming its large-cap counterparts, while Micron Technology, benefiting from the AI-driven rally, rose by 3.0% following a 4% gain in the prior session.

Zoom Video Communications experienced a 7.5% uptick after reporting quarterly earnings that exceeded forecasts due to strong demand for its expanded product range.

Norwegian Cruise Line Holdings saw a 9.1% increase in anticipation of a first-quarter profit driven by higher ticket prices.

Unity Software’s shares dropped by 13.7% after the video game software company’s full-year revenue prediction fell below expectations.

Cryptocurrency-related stocks, including Coinbase, Marathon Digital, and Riot Platforms, saw increases ranging from 3% to 6.7% as Bitcoin’s value climbed, indicating significant purchases by major investors. (Reported by Amruta Khandekar and Bansari Mayur Kamdar; Edited by Shinjini Ganguli)

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