Stock Market News: Dow Set to Open Down Ahead of CPI Inflation Report

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U.S. stock futures held near record levels on Wednesday as investors awaited the consumer-price index (CPI) inflation reading, which could move the market if it changes expectations for timing of the first interest-rate cut by the Federal Reserve.

Futures for the Dow Jones Industrial Average were up 12 point, or less than 0.1% after the index advanced 126 points on Tuesday to finish at 39,558. S&P 500 futures were up 0.1% while contracts tracking the tech-heavy Nasdaq—which ended at an all-time high—were flat. The yield on the benchmark 10-year U.S. Treasury note ticked below 4.43%.

The release of CPI data looms as a key catalyst that should shift the needle on the most dominant narrative in markets: the question of whether inflation is slowing enough to allow the Fed to cut interest rates from a generational peak. Stocks rallied into the finish in the previous session as investors looked past mixed producer-price index (PPI) data, while remarks from Fed Chair Jerome Powell added little color as the central banker said the Fed was still in wait-and-see mode. It all comes down to CPI this week.

“Markets had been on course to continue their quiet holding pattern ahead of today’s CPI but a late positive burst powered the S&P 500 to within a whisker of its all-time high and the Nasdaq to a new peak,” said Jim Reid, a strategist at Deutsche Bank. “There were no obvious drivers, but perhaps the absence of bad news was enough to inject some relief into markets.”

Economists expect that CPI rose 3.4% in April, down from 3.5% in March, while attention will also turn to an important core reading of CPI—stripping out food and energy—which is estimated at 3.6%, down from 3.8% in March. Core CPI has come in above expectations for the past three months.

Investors want to see signs that inflation continues to cool at a steady pace in order to grow more confident on the prospect of multiple rate-cuts this year, with markets currently pricing in the first rate cut by September.

“The concern here is that the markets get a reality check, i.e., we get an inflation reading that shows zero to no performance while the Fed shows further disappointment and confirms their stance that rates should stay higher for longer,” said Naeem Aslam, an analyst at broker Zaye Capital Markets.