By Shubham Batra and Johann M Cherian
(Reuters) -U.S. stock indexes were set to open lower on Tuesday following hawkish commentary from some Federal Reserve officials last week, while PayPal (NASDAQ:PYPL) climbed after agreeing to sell a part of its European buy now, pay later loans.
The S&P 500 and the Nasdaq ended lower on Friday, weighed by declines in market heavyweights as comments from Fed officials curtailed optimism that the central bank was nearing the end of its aggressive interest rate hikes.
Fed Governor Christopher Waller warned on Friday "core inflation is not coming down like I thought it would." Richmond Fed President Thomas Barkin said he was "comfortable" with further rate increases given that inflation was still not on the path back to 2%.
Traders see a 74% chance of just one 25-basis-point rate hike this year, expected in July, even as the U.S. central bank has signaled that borrowing costs could rise as much as half a percentage point by year-end, according to CMEGroup's Fedwatch Tool.
Investors are looking ahead to comments from Fed Vice Chair Michael Barr later in the day, and Fed Chair Jerome Powell's semiannual monetary policy testimony to the U.S. House Financial Affairs Committee on Wednesday.
"Investors are starting off a new holiday shortened week coming off of strong gains, and looking ahead to a couple of days of Powell on Capitol Hill," said Art Hogan, chief market strategist at B Riley Wealth.
"He (Powell) will be very careful to talk about what the current consensus is around the table at the Fed at the last meeting, because there's still plenty of data for them to disseminate between now and the next meeting in July."
Among individual stocks, PayPal Holdings rose 1.6% after investment firm KKR & Co agreed to purchase up to 40 billion euros ($43.71 billion) of the payments operator's buy now, pay later loans in Europe.
U.S.-listed shares of Chinese companies including Alibaba (NYSE:BABA) Group, JD.com and PDD Holdings fell between 2% and 5% in premarket trading as China made a smaller-than-expected cut its benchmark lending rates.
Alibaba Group also said Daniel Zhang would step down from his roles as CEO and chairman to focus on the company's cloud division.
At 9:00 a.m. ET, Dow e-minis were down 94 points, or 0.27%, S&P 500 e-minis were down 9.75 points, or 0.22%, and Nasdaq 100 e-minis were down 18 points, or 0.12%.
Tesla (NASDAQ:TSLA) Inc added 0.5% after Reuters reported that Rivian Automotive Inc has agreed to adopt the EV giant's North American Charging Standard as early as spring 2024.
Adobe (NASDAQ:ADBE) Inc lost 0.8% following a report that European antitrust regulators were preparing to launch a formal investigation into the firm's $20 billion buyout deal for cloud-based designer platform Figma later this year.
Nike (NYSE:NKE) slipped 1.7% after Morgan Stanley (NYSE:MS) flagged risk of margin pressure from inventory glut.
Dice Therapeutics Inc jumped 38.1% after Eli Lilly (NYSE:LLY) and Co said it would buy the drugmaker in an all-cash deal for about $2.4 billion.
Lazard Ltd surged 3.9% after Abu Dhabi's sovereign wealth fund ADQ's talks with the investment bank to take it private earlier this year fell apart, according to a report.