Futures Hold Steady Ahead of Crucial Inflation Report
On Wednesday, futures linked to the S&P 500 showed little movement after the index enjoyed four consecutive days of gains. Investors are now waiting for a crucial inflation report to provide insights into the Federal Reserve’s potential pace of interest rate cuts.
Nasdaq 100 futures saw a minor decline of 0.1%, largely due to a 1.3% dip in Alphabet’s stock during premarket trading. This drop was triggered by a media report indicating that the U.S. Department of Justice is contemplating drastic measures against Google, including the possibility of breaking up the tech giant.
The market’s recent recovery has been supported by a rebound in megacap and technology stocks, which helped offset losses from a global market downturn earlier this month. This decline was partly due to a sharp increase in the U.S. unemployment rate in July.
Attention is now focused on the upcoming July Consumer Price Index (CPI) report, scheduled for release at 8:30 a.m. ET. Economists expect the report to show that headline inflation remains at 3% year-on-year, consistent with June’s figure. This data follows a weaker-than-expected Producer Price Index (PPI) report from Tuesday, which suggested a continued moderation in inflation, though it still falls short of the Federal Reserve’s 2% target.
Atlanta Federal Reserve President Raphael Bostic has indicated that he would like to see more data before supporting a reduction in interest rates. “Notably, inflation has undershot consensus forecasts from April through June, with both prices and wages coming in cooler than economists anticipated,” said Stefan Koopman, a senior macro strategist at Rabobank. Koopman added that the Fed is expected to cut rates in September, primarily due to the rising unemployment rate and as a precaution against a potential recession.
Traders are largely anticipating that the Fed will initiate its rate-cutting cycle at its September 17-18 meeting. However, there is uncertainty about whether the cut will be 25 basis points or a more significant 50 basis points.
At 05:18 a.m. ET, Dow E-minis were up by 50 points, or 0.13%, while S&P 500 E-minis remained mostly unchanged at 5,459.25 points. The Cboe Volatility Index (VIX), a measure of market fear, remained below its long-term average of 20 points, sitting at 18.37 for the second consecutive day after reaching its highest level since 2020 just last week.
In individual stock news, Kellanova saw a notable 7% increase in premarket trading. This surge followed reports that candy giant Mars is nearing a nearly $30 billion deal to acquire Kellanova, known for its snack brands such as Cheez-It and Pringles.
