By Sruthi Shankar and Johann M Cherian
(Reuters) -Wall Street's main stock indexes were on track to open higher on Tuesday, building on strong gains in recent weeks as investors continued to bet on a policy pivot by the Federal Reserve next year.
The benchmark S&P 500 trades just 1.2% shy of its all-time closing high as traders price in an aggressive timetable for interest rate cuts next year after Fed Chair Jerome Powell said last week the historic tightening of monetary policy is likely over.
Despite attempts by policymakers to temper the optimism since the meeting, traders have priced in a 74% chance of the Fed cutting rates by 25 basis points in March, as per the CME Group's (NASDAQ:CME) FedWatch tool, and cuts of 143 bps by December 2024. [FEDWATCH]
The blue-chip Dow is set to secure a new all-time high, while the Nasdaq 100 is nearly 0.2% away from surpassing its record high hit in November 2021.
"I think as we get through the end of this year, the market has gotten quite expensive to look at from all levels and valuations at a time when earnings are just not there and earnings won't grow at least until probably the second quarter or even third quarter of next year," said Brian Klimke, chief market strategist at Cetera Investment Management.
Meanwhile, a Commerce Department report showed single-family homebuilding surged in November and could gain further momentum, with declining mortgage rates likely to draw potential buyers back into the housing market.
Later in the week investors await the final reading of third-quarter GDP and the monthly personal consumption expenditure index (PCE), the Fed's preferred inflation gauge.
San Francisco Fed President Mary Daly said on Monday that cuts to the U.S. central bank's benchmark rate are likely be appropriate next year because of an improvement in inflation this year, the Wall Street Journal reported.
Fed Atlanta President Raphael Bostic and Fed Chicago President Austan Goolsbee are scheduled to speak later in the day. Daly and Bostic are voting members in the FOMC's rate-setting committee next year.
At 8:46 a.m. ET, Dow e-minis were up 74 points, or 0.2%, S&P 500 e-minis were up 9.5 points, or 0.2%, and Nasdaq 100 e-minis were up 20.75 points, or 0.12%.
Light trading volumes are expected to impact market moves in the run-up to the Christmas and New Year holidays.
Among single stocks, Accenture (NYSE:ACN) dropped 2.6% after the IT services provider issued a downbeat second-quarter revenue forecast, anticipating cautious spending by clients as macroeconomic uncertainty remains an overhang.
Boeing (NYSE:BA) gained 0.1% after German airline Lufthansa said it ordered 40 737-8 MAX jets from the plane maker and agreed to 60 future purchasing options.
Crypto stocks like Coinbase (NASDAQ:COIN) Riot Platforms (NASDAQ:RIOT) and Marathon Digital (NASDAQ:MARA) added between 1.5% and 4.2% respectively as prices of the world's most valuable cryptocurrency, Bitcoin, ticked up.
PepsiCo (NASDAQ:PEP) slipped 0.5% after J.P. Morgan downgraded the stock to "neutral" from "overweight", while Amgen (NASDAQ:AMGN) rose 1.0% after BMO upgraded its rating on the drugmaker to "outperform" from "market perform".
Plug Power fell 4.1% after Piper Sandler downgraded the hydrogen fuel cell firm to "underweight".