Dow Jones futures advance as traders expect Fed to reduce interest rates

• Dow Jones futures gain ground as market sentiment improves on Fed rate cut bets.
• Traders broadly anticipate the Federal Reserve will deliver a 25-basis-point rate cut on Wednesday.
• Morgan Stanley and Deutsche Bank now project that the US central bank will implement three rate cuts this year.

Dow Jones futures climb by 0.13% to trade above 45,900 during European hours on Monday, ahead of the United States (US) market open. Moreover, the S&P 500 futures advance 0.15% to trade near 6,600, while Nasdaq 100 futures edge up 0.06% to trade above 24,100.

US stock futures appreciate as market sentiment improves ahead of the looming Federal Reserve's (Fed) policy decision due on Wednesday. Traders anticipate the US Federal Reserve (Fed) will cut rates by 25 basis points at its September meeting, with a slim possibility of a 50-basis-point move. Markets have also priced in continued easing through 2026 to guard against a potential recession.

The University of Michigan's (UoM) preliminary Consumer Sentiment Index released Friday showed consumer sentiment fell to 55.4, worse than expected 58.0 in September, while long-run inflation expectations rose to 3.9% amid concerns over tariffs. However, investors are betting inflation remains subdued enough for the Fed to cut rates next week and possibly beyond.

Reuters reported that Morgan Stanley and Deutsche Bank now expect the Federal Reserve to deliver three rate cuts this year, after recent data pointed to easing inflation pressures. In separate notes on Friday, the brokerages projected 25-basis-point reductions at each of the Fed's remaining meetings in September, October, and December.

The NY Empire State Manufacturing Index is set for release later in the North American session, with economists surveyed by Dow Jones forecasting a reading of 4.5, down sharply from the prior 11.9. Traders are also keeping their eyes on whether President Donald Trump's economic adviser Stephen Miran will be sworn in as a Fed governor before the policy meeting.