U.S. stock futures edge higher as wary traders eye crucial inflation report

U.S. stock futures were inching higher on Wednesday, but with traders wary of making bold bets lest they get caught out by an inflation report deemed crucial to the market’s short-term trajectory.

How are stock-index futures trading
  • S&P 500 futures
    rose 13 points, or 0.3% to 4,138

  • Dow Jones Industrial Average futures
    added 79 points, or 0.2% to 32,817

  • Nasdaq-100 futures
    gained 45 points, or 0.4% to 13,078

On Tuesday, the Dow Jones Industrial Average
fell 0.2% to 32774, the S&P 500
declined 0.4% to 4122 — its fourth-straight losing session — and the Nasdaq Composite
dropped 1.2%, to 12493, its third consecutive drop.

What’s driving markets

The mood is decidedly cautious as traders await the July U.S. consumer-price index (CPI) report due at 8.30 a.m. Eastern.

Equities have been roiled in 2022 but despite bouncing off its mid-June low, the S&P 500 index remains down 13.5% for the year to date. The drop has been driven by fears that 40-year high inflation will batter consumer confidence, cause the Federal Reserve to hike borrowing costs aggressively and tip the U.S. economy into recession.

Consequently, investors are eager to see that inflation has peaked. Economists forecast headline year-over-year CPI growth will dip from 9.1% in June to 8.7% last month, mostly the result of lower energy costs.

See: U.S. consumers likely got some relief from sizzling price increases in July but Fed won’t feel any better

But many traders fear that if the data shows “core” inflation remains stubbornly high, then the more optimistic tone in stocks seen over much of the past two months will be challenged.

“Markets seems to be going into today’s all important U.S. CPI a little on the apprehensive side,” said strategists at Deutsche Bank in a note to clients.

“The nervousness is hardly surprising when you consider that these prints have coincided with some of the most volatile market reactions over the past year. Indeed, it was only two months ago that the release sent the S&P 500 to its lows for the year and contributed to the Fed accelerating its hiking pace to 75bps,” Deutsche added.

Ahead of the inflation report the dollar index
was down 0.1% to 106.31 and U.S. 10-year Treasury yields
were little changed at 2.780%.

Also damping sentiment is a recent rash of poorly-received corporate news. There is particular concern about the health of the semiconductor sector after Micron
followed Nvidia
with a warning about revenues. The PHLX Semiconductor Index
fell 4.6% on Tuesday and is down 27.4% so far in 2022.

In addition, a recent rally in badly battered former bull market darlings has come to a juddering halt in the past few sessions, also hurting retail investor confidence. And some are due for more pain on Wednesday.

Shares in crypto exchange Coinbase
were down a further 5.5% in premarket action after reporting a billion dollar second quarter loss, and Roblox
the videogame group, plunged 17.4% after a key sales metric declined for the second consecutive quarter.

Companies in focus
How are other assets faring
  • Oil futures were softer, with U.S. WTI
    off 0.8% to $89.73 a barrel.

  • Gold
    fell 0.3% to $1,807 an ounce and bitcoin
    lost 0.8% to $22,964.

  • Asia markets were softer following Wall Street’s overnight lead and after data showed China’s inflation at a two-year high. The Shanghai Composite
    lost 0.5%, Hong Kong’s Hang Seng
    shed 2.2% and Japan’s Nikkei 225
    fell 0.65%. In Europe the Stoxx 600
    retreated 0.2%.

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