Stock futures are up slightly as fears grow over upcoming interest rate hikes

There's too much optimism in the market right now between a Fed pause and a pivot, says Liz Ann Sonders

Stock futures traded lightly late Monday as investors tried to shake off the previous session’s selloff.

Dow Jones Industrial Average futures added 35 points, or 0.1%. S&P 500 and Nasdaq-100 futures both gained 0.1%.

Monday’s close marked a negative start to the trading week. The Nasdaq Composite led the charge lower, shedding 1.93% to end the session at 11,239.94. The S&P 500 fell 1.79% to end at 3,998.84, followed by the Dow Jones by 1.4%, or 482.78 points, slipping to 33,947.10.

Better-than-expected November ISM Services data, which sees the level of manufacturing buying as an indicator of the health of the broader economy, put pressure on stocks. Indeed, investors are increasingly wary that the Federal Reserve will have to raise interest rates for longer than expected to achieve its intended goal of lowering inflation.

The release aligns with last week’s payrolls report in pointing to a resilient economy. But these elements add to what Dan Greenhaus, chief strategist at Solus Alternative Asset Management, called a more “mixed” data set that gives investors mixed signals about the state of the economy.

Market watchers are still widely expecting a 50 basis point interest rate hike at the Fed’s December meeting. But Greenhaus said investors aren’t sure how long the central bank’s interest rate hike campaign is likely to last, especially given recent data showing the economy remains strong in some regions.

“From a market perspective, I think you’re still struggling with the overshoot days from the 75 basis point bull days,” Greenhaus said on CNBC’s “Closing Bell: Overtime.” “And now you’re really focusing on, ‘How far do we really have to go to bring all inflation down?'”

Investors will await Tuesday morning’s international trade data for insight into the strength of the U.S. and global economy. Later today, they will be watching post-bell earnings reports from Smith & Wesson and Stitch Fix.

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