Futures for Wall Street’s major stock indexes were mostly steady on Wednesday as investors held off from making significant moves in anticipation of a crucial inflation report, which is expected to provide insights into the potential pace of future interest rate cuts by the Federal Reserve.
The July Consumer Price Index (CPI) report, scheduled for release at 8:30 a.m. ET, is projected to show that headline inflation has increased by 3% year-over-year, consistent with the rate recorded in June. This report is critical for investors as it could impact expectations for monetary policy adjustments by the Federal Reserve.
On Tuesday, both the S&P 500 and Nasdaq indices marked their fourth consecutive day of gains. This positive momentum followed the release of softer-than-expected producer prices data, which suggested that inflationary pressures were easing, though not yet reaching the Fed’s target of 2%. The recent rebound in major technology and large-cap stocks has helped the markets recover a significant portion of the losses incurred earlier this month, which were triggered by a spike in the U.S. unemployment rate in July.
Atlanta Federal Reserve President Raphael Bostic commented on Tuesday, indicating that he would prefer to wait for additional data before endorsing a reduction in interest rates. His cautious stance reflects the ongoing uncertainty and the Fed’s approach to balancing inflation control with economic growth.
Stefan Koopman, a senior macro strategist at Rabobank, noted that inflation has consistently undershot forecasts from April through June, with both price and wage growth coming in lower than expected. Koopman anticipates that the Fed will initiate a rate cut in September, primarily due to the rising unemployment rate and as a precautionary measure against a possible recession.
Traders are currently divided on whether the Fed will implement a 25 basis points (bps) or a more substantial 50 bps rate cut at its upcoming September 17-18 meeting. According to the CME FedWatch Tool, market expectations are closely split between these two potential outcomes.
At 6:45 a.m. ET, futures for the major stock indexes were as follows: Dow E-minis were up by 4 points, or 0.01%; S&P 500 E-minis were up by 2.25 points, or 0.04%; and Nasdaq 100 E-minis were up by 9.75 points, or 0.05%. The Cboe Volatility Index (VIX), which measures market fear and uncertainty, remained below its long-term average of 20 points, registering at 18.33. This was a decrease from the peak levels observed last week, which had been the highest since 2020.
In premarket trading, performance among major growth stocks was mixed. Nvidia showed notable strength, gaining 1.5%, while Alphabet, the parent company of Google, saw a decline of 0.9%. Adding to the headlines, a media report suggested that the U.S. Department of Justice is contemplating options that could include breaking up Google, which could have significant implications for the tech giant.
In other corporate news, Kellanova, the company known for brands like Cheez-It and Pringles, surged nearly 8% after Mars, the family-owned candy and pet food company, announced it would acquire Kellanova in a deal valued at approximately $36 billion. This acquisition has provided a boost to Kellanova’s stock.
Overall, the market’s cautious optimism reflects anticipation surrounding the upcoming inflation data and its potential impact on Federal Reserve policy, as well as ongoing reactions to corporate news and economic indicators.