U.S. stock futures were a touch firmer early Tuesday, with traders wary of taking big positions before the October CPI report that may determine the next move by the Federal Reserve.
How are stock-index futures trading
-
S&P 500 futures
ES00,
+0.06%
rose 8 points, or 0.2%, to 4433 -
Dow Jones Industrial Average futures
YM00,
+0.02%
added 40 points, or 0.1%, to 34425 -
Nasdaq 100 futures
NQ00,
+0.19%
climbed 43 points, or 0.3%, to 15590
On Monday, the Dow Jones Industrial Average
DJIA
rose 55 points, or 0.16%, to 34338, the S&P 500
SPX
declined 4 points, or 0.08%, to 4412, and the Nasdaq Composite
COMP
dropped 30 points, or 0.22%, to 13768.
What’s driving markets
Trading is cautious as investors are reluctant to make bold bets on the market ahead of the U.S. inflation data due at 8:30 a.m. Eastern.
After the S&P 500 closed down less than 0.1% on Monday, the shifts in stock futures early in the new session are similarly minimal. The dollar is little changed, too, while Treasury yields
BX:TMUBMUSD10Y
dipped a few basis points.
“Markets have been extremely dull over the last 24 hours, with bonds and equities seeing little movement as investors look forward to the U.S. CPI print today,” said Jim Reid, analyst at Deutsche Bank.
As inflation has declined this year, investor hopes have grown that the Fed is done raising interest rates. This has powered a rally in bond markets, pushing implied borrowing costs down sharply from 16-year highs and lifting the major stock indices. The S&P 500 is up 14.9% so far in 2023.
Equity bulls will therefore want to see a confirmation of this narrative in the inflation report.
The consumer price index is forecast to have risen 3.3% in the year to October, slower than the annual 3.7% pace recorded for September. The decline is the result of lower energy prices, which may take the month-on-month growth to just 0.1%, down from 0.4%.
However, the core measures , which strip out volatile items like food and energy, are expected to be sticky, with the annual rise unchanged from September at 4.1% and the monthly measurement remaining at 0.3%.
“[A]n inflation read in line with expectations, or ideally softer than expected, should give further support to the Federal Reserve doves, cement the idea that the Fed is done hiking the interest rates and boost the rate cut expectations for next year,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Markets are currently pricing just a 14% chance the central bank will increase interest rates by another 25 basis points to a range of 5.50% to 5.75% at its December meeting.
However, Deutsche’s Reid notes that: “[I]f these forecasts are right, it would be the third consecutive month with core CPI running at +0.3% or more,” and given that is not compatible with the Federal Reserve’s 2% annual inflation “then there’s little doubt that the Fed would look to tighten policy again.”
Fed officials making comments on Tuesday include Richmond Fed President Thomas Barkin, who will speak on the economic outlook at 8:30 a.m.; Fed Vice Chair for Supervision Michael Barr, who testifies to a Senate panel at 10 a.m.; and Chicago Fed President Austan Goolsbee, who will talk on the economic and policy outlook at 12:45 p.m.
Results from Home Depot
HD,
due before the opening bell rings on Wall Street, are the earnings highlight for Tuesday.
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