Market Snapshot: U.S. stock futures slump after CPI data shows inflation at new 41-year high

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U.S. stock index futures traded sharply lower on Wednesday, after the June consumer price index data showed inflation climbed to new 41-year high of 9.1%, as gasoline prices surged.

How are stock-index futures trading
  • S&P 500 futures
    ES00,
    -1.52%

    lost 61.5 points, or 1.6% to 3,834

  • Dow Jones Industrial Average futures
    YM00,
    -1.12%

    declined 342 points, or 1.1% to 30,657

  • Nasdaq 100 futures
    NQ00,
    -2.07%

    dropped 259 points, or 2.3% to 11,513

On Tuesday, the Dow industrials
DJIA,
-0.62%

fell 193 points, or 0.62%, to 30,981, the S&P 500
SPX,
-0.92%

declined 0.9% to 3,819, and the Nasdaq Composite
COMP,
-0.95%

dropped 0.9%, to 11,265.

The S&P 500 has lost 83.82 points, or 2.1%, over the last three trading days.

What’s driving markets

The U.S. corporate earnings season kicks into gear on Thursday, but for now inflation, in the shape of the June consumer price index report, is the focus for traders.

Soaring gasoline prices in June drove the rate of U.S. inflation to 9.1%, a nearly 41-year peak. The CPI jumped 1.3% last month to mark the third time in the last four months it’s topped 1%. Economists polled by The Wall Street Journal had forecast a 1.1% advance.

Stocks have endured a miserable year to date, with the benchmark S&P 500
SPX,
-0.92%

down close to 20%, battered by persistent inflation concerns and other headwinds.

“Heading into CPI and earnings, after markets had climbed a wall of worry since mid-June, they seem to be losing a bit of footing again over the last few days as fears of a recession dominate again, alongside fears of aggressive rate hikes by central banks, rising Covid cases in China and the prospect of Russia cutting off Europe’s gas,” said Jim Reid, market analyst at Deutsche Bank.

The International Monetary Fund on Tuesday warned that a surge in inflation poses “systemic risks” to the U.S. economy, a concern not lost on the Federal Reserve as it seeks to damp rising prices by sharply raising borrowing costs. The Fed’s tighter policy trajectory has removed liquidity from the market and helped pressure equity valuations.

“A further rise in the U.S. consumer prices will certainly revive the Fed hawks today, push the U.S. dollar higher and equities lower,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, told clients in a note earlier.

Companies in focus
  • Shares of Delta Air Lines Inc.
    DAL,
    +6.15%

     dropped 3% in premarket trading Wednesday, after the air carrier reported second-quarter profit that fell well short of expectations but revenue that rose above pre-pandemic levels to beat forecasts. Net income of $735 million, or $1.15 a share, was down from $1.44 billion, or $2.21 a share, in the same period in 2019. 

  • Shares of IronSource Ltd.
    IS,
    -3.04%

     jumped 64% in premarket trades on Wednesday after the business app company agreed to be acquired by Unity Software Inc. in an all-stock deal valued at $4.4 billion. Unity stock is down about 3.8%.

  • Polestar Automotive Holding UK PLC
    PSNYW,
    -4.70%

    shares went up 3.9% in premarket trading after the Swedish electric car company backed its full-year guidance for deliveries of 50,000 cars, as the company offered an update on its year-to-date performance.

Other markets
  • Bourses across Europe mostly followed Wall Street’s overnight retreat, leaving the Stoxx 600
    SXXP,
    -1.60%

    off 0.7%.

  • The U.S. 10-year Treasury yield
    TMUBMUSD10Y,
    3.052%

    fell 1.1 basis points to 2.965% as the risk aversion evident in U.S. stock futures encouraged flows into sovereign bonds.

  • The dollar slightly firmer versus the yen
    USDJPY,
    +0.55%
    ,
    but softer against the euro
    EURUSD,
    -0.08%
    ,
    which was steady after nearing parity in recent sessions. The ICE Dollar Index
    DXY,
    +0.26%

    was holding near its highest level in nearly 20 years.

  • WTI crude
    CL.1,
    -0.54%

    added 1% to $96.75 a barrel having lost 8.5% over the previous two sessions on fears slowing economic growth would hit demand.

  • Gold
    GC00,
    -0.87%

    went up 1% to $1,726.8 an ounce and Bitcoin
    BTCUSD,
    -1.04%

    was higher at around $19,811.