Futures tepid as latest inflation test looms

Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 5, 2024. REUTERS/Andrew Kelly

By Shashwat Chauhan and Shristi Achar A

(Reuters) -U.S. stock index futures steadied on Wednesday in the run-up to a crucial inflation reading that could help shape the Federal Reserve’s monetary policy path this year.

Investors dialed down enthusiasm around how much the central bank could cut rates after recent data indicating a robust U.S. economy, along with two firm inflation readings earlier in 2024.

The focus is now on the March reading of the U.S. Consumer Price Index (CPI), which is expected to show a rise in headline inflation to 3.4% year-on-year, from 3.2% in February.

The core figure, which excludes volatile components such as food and energy, is expected to ease to 3.7% year-on-year, versus 3.8% in February.

“We expect March CPI to show a smaller monthly increase than in January and February. Overall, our base case remains that the Fed should be in a position to cut rates around mid-year for a total of 75 bps of rate reductions in 2024,” analysts at UBS Global Wealth Management said in a note.

Traders have priced in about 67-basis-point rate cuts from the Fed, according to LSEG data, down from about 150 bps anticipated at the start of the year.

But they still see a nearly 54% chance for an at-least 25 bps cut in June, according to the CME’s FedWatch Tool, down from over 60% last week.

Minutes from the Fed’s March meeting, where it stuck to its guidance of three rate cuts this year, are due later in the day and could be key in gauging the central bank’s stance on cutting interest rates.

Atlanta Fed President Raphael Bostic said in an interview to Yahoo Finance on Tuesday that it was possible the Fed may not cut interest rates at all this year if the progress on inflation stalls and the economy continues to outperform.

The Nasdaq and the S&P 500 posted modest gains in the last session, although declining financial shares weighed ahead of the unofficial start to the first-quarter earnings season.

Banking giants JPMorgan Chase, Citigroup and Wells Fargo are scheduled to report towards the end of the week.

At 7:06 a.m. ET, Dow e-minis were up 60 points, or 0.15%, S&P 500 e-minis were up 4.5 points, or 0.09%, and Nasdaq 100 e-minis were up 9.5 points, or 0.05%.

Megacap growth stocks were mixed in premarket trading, with Alphabet edging up 0.7%, while Nvidia dipped 1.1%.

Among other stocks, U.S.-listed shares of Taiwan Semiconductor Manufacturing Co rose 1.1% after the chipmaker beat market estimates for first-quarter revenue.

Delta Air Lines advanced 4.7% after the carrier offered an upbeat outlook for the current quarter and topped Wall Street estimates for first-quarter earnings on buoyant travel demand.

U.S.-listed shares of Alibaba gained 2.9% after the company’s co-founder Jack Ma penned a lengthy memo to employees on Tuesday, expressing support for the internet giant’s restructuring efforts – a rare move from the billionaire, who has spent the last few years away from the spotlight.

(Reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by Pooja Desai)