By Sruthi Shankar and Shristi Achar A
(Reuters) - Wall Street's main indexes were set for a subdued open on Tuesday as investors assessed chances of the Federal Reserve holding interest rate at its meeting next week, with mixed data adding to uncertainty around the policy outlook.
The U.S. services sector barely grew in May as new orders slowed, data on Monday showed, pushing a measure of prices paid by businesses for inputs to a three-year low.
While that signaled the Fed's monetary tightening was cooling the world's largest economy, it follows strong jobs data last week, clouding the outlook for the Fed's policy path.
"The difference between skip and pause and it's impact on the next meeting is what investors are kind of wrestling with," said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest.
Investors await inflation data due next week, ahead of the Fed meet. Consumer prices are likely to have cooled slightly on a month-over-month basis in May but core prices are expected to have remained sticky.
"The market is on pause now until we get to the Fed meeting and the inflation data," Nolte said.
Fed officials last week made the case for the central bank to keep rates steady at its June 13-14 meeting and look for more factors to ascertain whether the economy was cooling or higher rates were warranted. The officials have entered a "blackout" period.
Fed fund futures indicate traders have priced in a 75% chance that the Fed will hold interest rates in the 5%-5.25% range, according to CMEGroup's Fedwatch tool. However, they see 50% odds of another 25-basis-point rate hike in July.
U.S. stocks have advanced in recent weeks, with a rally in megacap stocks, a stronger-than-expected earnings season and hopes of a pause in interest rate hikes pushing the benchmark S&P 500 and the tech-heavy Nasdaq to fresh 2023 highs on Friday.
Apple Inc (NASDAQ: AAPL ) slipped 0.5% in premarket trading after hitting a record high in the previous session. The iPhone maker on Monday unveiled a costly augmented-reality headset called the Vision Pro, barging into a market dominated by Meta.
Advanced Micro Devices (NASDAQ: AMD ) rose 0.9% after Piper Sandler raised price target on the stock to $150, the second highest on Wall Street, as per Refintiv data.
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