U.S. stock index futures were holding near their highs of the year early Tuesday amid cautious trading ahead of inflation data that may impact the debate at this week’s Federal Reserve policy meeting.
How are stock-index futures trading
-
S&P 500 futures
ES00,
+0.11%
rose 3 points, or 0.1% to 4682 -
Dow Jones Industrial Average futures
YM00,
+0.18%
gained 39 points, or 0.1% to 36845 -
Nasdaq 100 futures
NQ00,
+0.25%
added 27 points, or 0.2% to 16477
On Monday, the Dow Jones Industrial Average
DJIA
rose 157 points, or 0.43%, to 36405, the S&P 500
SPX
increased 18 points, or 0.39%, to 4622, and the Nasdaq Composite
COMP
gained 29 points, or 0.2%, to 14432.
What’s driving markets
The S&P 500 index sits at its best level since March 2022, having rallied 20.4% so far this year, partly on hopes slowing inflation will allow the Federal Reserve to start cutting interest rates in coming months.
The central bank is widely expected to leave borrowing costs unchanged at a range of 5.25% to 5.50% at the conclusion of its two-day meeting on Wednesday.
But what the Fed, and Chair Jerome Powell, say about the likelihood of any rate cuts in the future may be impacted by U.S. November consumer price index data, which will be released at 8:30 a.m. Eastern on Tuesday.
Economists expect the headline month-on-month CPI to be unchanged, just like it was in October, and the annual rate to dip to 3.1% from 3.2%. However, the core CPI, which strips out volatile items like food and energy, is forecast to rise to rise 0.3% from 0.2%, and the annual rate to remain at 4%.
“Investors are in a holding pattern ahead of a slew of economic data and interest rate decisions and that’s kept market activity pretty subdued,” said Danni Hewson. AJ Bell head of financial analysis.
The European Central Bank and the Bank of England are also expected to stand pat on interest rates following their meetings on Thursday.
“Although no one expects any surprises from central bankers in terms of their decision, it will be their tone and choice of words with the power to send any anticipated Santa rally hurtling in the other direction,” Hewson added.
Traders also will be keeping an eye on a $21 billion auction of 30-year bonds by the U.S. Treasury, due at 1 p.m. Last month’s 30-year auction was not well-received and sparked a spike in yields and volatility in stocks.
Equity investors need to be wary of the CPI data coinciding with bonds giving up some of their recent gains and for yields to reverse higher again, according to Mark Newton, head of technical strategy at Fundstrat,
“Treasury yields look to be starting to turn back higher, and I suspect the CPI report might prove to be the catalyst for TNX
XX:TNX
[the CBOE 10 Year Treasury Note Yield Index index] getting back over 4.30%,” said Newton.
“This would likely prevent stocks from making too much further headway given recent correlation trends. However, yields have indeed risen over the last few trading days and stocks thus far have not been affected,” he added.
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