Stock futures pointed to a slightly softer opening for Wall Street as traders awaited inflation data that They could show whether the Federal Reserve will opt for a slower pace of interest rate cuts.
S&P 500 contracts fell 0.2% after the index hit a record high on Wednesday. Ten-year Treasury yields held above 4%, near the highest levels since late July, while the Bloomberg Dollar Index held steady after an eight-day streak of gains, the longest since April 2022.
US consumer price data is expected to show inflation moderated further, supporting the view that the Fed will continue to ease its monetary policy in the coming months.
But a surprisingly strong jobs data for September has forced traders to reduce their rate cut bets, and many expect a 25 basis point reduction next month.
A strong inflation reading could change the Fed’s reaction function, Bénédicte Lowe, BNP Paribas Markets 360 strategist, said on Bloomberg TV.
“With stocks near all-time highs in the United States and near multi-year highs in Europe, the risks are more skewed to the downside if we see a pickup in inflation from here,” Lowe said.
The minutes of the September meeting of the Federal Reserve showed that the majority of rate setters had supported a 50 basis point cut, although some officials had preferred to cut at a more gradual pace.
Meanwhile, Delta Air Lines Inc. kicked off third-quarter earnings season, with earnings and sales forecasts missing expectations. JPMorgan Chase & Co. and Wells Fargo & Co. are scheduled to report results on Friday.
Investors will want to see if the gains are strong enough to sustain this year’s roughly 20% rally in the S&P 500. Companies in the index are expected to report a 4.7% increase in quarterly profits from last year, according to data compiled by Bloomberg Intelligence, down from the 7.9% growth projected on July 12.
Brian Levitt, global market strategist at Invesco, expects companies to beat lowered expectations, thus sustaining the rebound.
“It’s a good nominal growth backdrop, investors are sitting back, looking at the stock markets and saying, can I invest if the stock market has hit all-time highs?” Levitt told Bloomberg TV. “Peak inflation, peak tightening and peak rates should be good for stocks.”
Among the biggest movers on Thursday, U.S. insurance stocks rose in pre-market trading after Hurricane Milton weakened to a Category 3 storm, and supply chain services provider GXO Logistics Inc. rose on news of a possible sale.
The pharmaceutical company Pfizer Inc. fell after two of its former executives decided not to get involved in an activist campaign against the company.
In Europe, the Stoxx 600 index was little changed. Brent crude futures strengthened above $77 a barrel, fearing that Israeli retaliation against Iran for its recent missile attacks will trigger an all-out war in the Middle East.
