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(Reuters) – U.S. stock index futures edged higher on Wednesday as investors braced for inflation data to gauge the pace of interest rate hikes by the U.S. Federal Reserve and the impact of rising prices on the health of the economy.
Economists are already forecasting another month of 40-year-high inflation that could further solidify expectations for a big rate hike this month.
As central banks move to aggressively raise borrowing costs to stamp out runaway inflation, fears of an economic downturn have escalated, sparking one of the worst Wall Street selloff in decades in the first half of the year.
All three main indexes ended sharply lower on Tuesday, with the benchmark S&P 500 falling for a third consecutive session, as fears of a recession were exacerbated by the inversion of the two year-/10-year yield curve. [US/]
The Labor Department’s report, due at 8:30 am ET (1230 GMT), is expected to show the Consumer Price Index (CPI), which tracks the prices that urban consumers spend on a basket of goods, jumped in June on both a monthly and annual basis by 1.1% and 8.8%, respectively.
However, so-called “core” CPI, which excludes volatile food and energy prices, is seen cooling down to 5.7% year-on-year.
“We think it is unlikely that June CPI will be the first in the string of softer inflation prints that Fed officials focused on observing before shifting away from a very hawkish policy stance,” Citi economists wrote in a note.
“Given some recent expectation for slowing inflation through a steeper growth slowdown or cooling inflation expectations, markets could still be particularly sensitive to another upside surprise.”
A stronger-than-expected monthly payrolls data cemented expectations for a 75 basis point rate hike in July, although growing worries about a recession have tempered bets on how high the Fed will hike rates.
Traders’ bets of a 75 basis points rate hike this month stood at 88.2%, as per CME Group’s (NASDAQ:CME) Fedwatch tool.
JPMorgan Chase & Co (NYSE:JPM) and Morgan Stanley (NYSE:MS) will be the first among big U.S. banks to report quarterly results this week, kicking off the second-quarter reporting season in earnest.
Earnings reports will be parsed for how companies are coping with rising costs, with investors also closely watching profit forecasts to gauge the likelihood of a recession.
At 06:54 a.m. ET, Dow e-minis were up 42 points, or 0.14%, S&P 500 e-minis were up 6.25 points, or 0.16%, and Nasdaq 100 e-minis were up 32 points, or 0.27%.
Twitter Inc (NYSE:TWTR) rose 1.7% in premarket trading as the social media company sued Tesla (NASDAQ:TSLA) Chief Executive Officer Elon Musk for violating his $44 billion buyout deal.
