NEW YORK, Feb 27 — Wall Street was set for a subdued open today as investors awaited a crucial inflation report and other economic data that would shape expectations for interest rate cuts from the Federal Reserve and test the recent rally in markets.

Market focus is back on the Fed’s monetary policy path after a frenzy around artificial intelligence (AI) in the previous week eclipsed concerns about delayed rate cuts and pushed the S&P 500 and Dow Jones industrials to new peaks.

The highlight for this week will be the release of January’s personal consumption expenditures price index (PCE)- the Fed’s preferred inflation gauge on Thursday.

If the PCE reading hints at sticky inflation, like recent data on consumer and producer prices, it could impact Fed’s monetary policy and prompt traders to further push back their bets on the timing of rate cuts this year.

Currently, 63 per cent of traders expect the Fed to start cutting rates by June, down from nearly 98 per cent at the end of January, according to the CME Group’s FedWatch tool. Bets for a July rate cut stand at 83.6 per cent.

“I think that investors are getting used to the concept that the Fed will not cut rates (soon),” said Peter Andersen, founder of Andersen Capital Management in Boston.

Andersen said that hopes of a soft landing - where the Fed brings down inflation without severely hurting the economy - were supporting market sentiment.

“I’m expecting a favorable print for that (PCE), indicating that the soft landing has gained more momentum.”

Reports on gross domestic product (GDP), jobless claims and manufacturing activity, which are due this week, will offer further clues on the timing of rate cuts. A survey on consumer confidence is due after markets open on Tuesday.

Investors will also look forward to comments from some Fed policymakers, including voting members Atlanta Fed President Raphael Bostic, New York Fed chief John Williams and Fed Board Governor Christopher Waller, who are scheduled to speak this week.

Congressional standoff this week over government funding will also be in focus. Major ratings agencies say the repeated down-the-wire debt ceiling negotiations is taking a toll on the creditworthiness of the world’s largest economy whose debt has surpassed $34 trillion.

At 8:31 a.m. ET, Dow e-minis were down 26 points, or 0.07 per cent, S&P 500 e-minis were up 1.5 points, or 0.03 per cent, and Nasdaq 100 e-minis were up 21.75 points, or 0.12 per cent.

Tesla outperformed megacap peers, rising 2.1 per cent in premarket trading, while Micron Technology, a beneficiary of the AI rally, climbed 3.0 per cent after a 4 per cent advance in the previous session.

Zoom Video Communications added 7.5 per cent as the video-conferencing provider posted better-than-expected quarterly results on strong demand for its expanding product portfolio.

Norwegian Cruise Line Holdings advanced 9.1 per cent on forecast of a first-quarter profit due to higher ticket prices.

Unity Software plunged 13.7 per cent after the videogame software provider forecast full-year revenue below estimates.

Crypto-linked stocks such as Coinbase, Marathon Digital and Riot Platforms rose between 3 per cent and 6.7 per cent as bitcoin surged on signs big players were buying the cryptocurrency. — Reuters