Stock futures were narrowly mixed on Monday morning as the possibility of a rate hike in June loomed large over Wall Street.
S&P 500 futures were down 0.06%, Dow Jones Industrial Average futures fell 0.05%, and Nasdaq futures gained 0.05%.
The U.S. economy is “on the verge” of warranting a rate increase next month, Boston Federal Reserve President Eric Rosengren said in an interview with the Financial Times over the weekend. Rosengren, a voting member of the Federal Open Market Committee, recently said steady hikes should resume following initial liftoff in December.
St. Louis President James Bullard, also a voting member of the FOMC, said economic trends back up the case for slow normalization of rates rather than no rate hikes.
“Labor markets are relatively tight. This may put upward pressure on inflation going forward,” Bullard said in a speech in Beijing on Monday. “This is an important factor supporting the FOMC view on the expected path of the policy rate.”
Wall Street received a wake-up call last week as the likelihood of a rate hike sooner rather than later was made clear. Volatility spiked last Wednesday after the release of minutes from the Fed’s April meeting that outlined the viewpoints of monetary policy committee members.
“The more hawkish tone to the April FOMC minutes surprised market participants who had become complacent regarding the potential for a summer rate increase,” Bill Northey, chief investment officer at the Private Client Group at U.S. Bank, told TheStreet.
A rate hike in June now has a 30% probability, according to CME Group, after starting the month with odds of less than 10%.
German pharmaceuticals and chemicals company Bayer (BAYRY) announced on Monday that it has offered to buy U.S.-based crops and seeds specialist Monsanto (MON) for $62 billion. The all-cash offer values Monsanto at $122 a share, a 37% premium to Monsanto’s close on May 9, the day before Bayer made a written proposal to the company. Monsanto shares surged 8% in premarket trading.
In other deals news, Tribune Publishing (TPUB) rejected Gannett’s (GCI) latest $864 million takeover proposal, sources told Reuters. Tribune, owner of the Los Angeles Times and Chicago Tribune, did agree to share confidential information with Gannett, a possible path to further negotiations.
Alcoa (AA) was upgraded to buy from neutral with an $11 price target at Bank of America. Analysts said the company is leveraged to benefit from higher aerospace growth.
Bank of America also gave a two-notch upgrade to Staples (SPLS) to buy with a $10 price target. The firm said the move was a valuation call as the stock has fallen 21% over the past two weeks following the dissolution of its planned merger with Office Depot (ODP) .