Monday, February 6, 2023
HomeMarketU.S. stock futures inch higher ahead of crucial inflation report

U.S. stock futures inch higher ahead of crucial inflation report

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U.S. stock futures were a touch firmer Tuesday as investors awaited crucial inflation data.

How are stock-index futures trading
  • S&P 500 futures
    ES00,
    +0.13%
    added 4 points, or 0.1%, to 4029

  • Dow Jones Industrial Average futures
    YM00,
    +0.12%
    rose 38 points, or 0.1%, to 34307

  • Nasdaq 100 futures
    NQ00,
    +0.19%
    climbed 8 points, or 0.1%, to 11838

On Monday, the Dow Jones Industrial Average
DJIA,
+1.58%
rose 529 points, or 1.58%, to 34005, the S&P 500
SPX,
+1.43%
increased 56 points, or 1.43%, to 3991, and the Nasdaq Composite
COMP,
+1.26%
gained 139 points, or 1.26%, to 11144. The Nasdaq Composite is up 8% from its 2022 low hit in mid October, but remains down 28.8% for the year to date.

What’s driving markets

Trading was muted early on Tuesday ahead of an important consumer price index report due for release at 8:30 a.m. Eastern.

“It’s been a do-nothing day as investors take stock before the onslaught of a series of high-risk events,” said Stephen Innes, managing partner at SPI Asset Management.

Investors wish to see further evidence that inflation is continuing to slip from the four decade peak of 9.1% hit in June, and that this will allow the Federal Reserve to be less aggressive in hiking interest rates. The S&P 500 has fallen 16.3% so far this year in the face of the Fed raising borrowing costs by 375 basis points since March.

The year-on-year CPI for November is forecast by economists to show a decline to 7.3% from 7.7% last month. The number should color the Fed’s thinking as it prepares to deliver its latest monetary policy decision on Wednesday, when the market expects it to raise rates by 50 basis points to a range of 4.25% to 4.50%.

“We don’t get many days as important as the next two, and the U.S. CPI today and the FOMC [Fed] tomorrow are likely to be the difference between a big Santa Claus rally and a visit from Scrooge ahead of Christmas,” said Jim Reid, strategist at Deutsche Bank, in a morning note.

“Bear in mind the S&P 500’s best and worst day of the year so far have both come on a CPI day, and it was only last month that the downside surprise triggered a seismic market reaction, leading to the biggest one-day gain for the S&P 500 (+5.54%) since April 2020, and the largest daily decline in the 2-year Treasury yield (-24.7bps) since 2008,” Reid added.

Mark Newton, head of technical strategy at Fundstrat, understood why traders were cautious. “Overall, this remains a difficult spot to place big bets ahead of a very busy week of economic and political developments.”

“My short-term analysis suggests a stalling out in this bounce into Tuesday/Wednesday at 4050 before turning back down. 3906 will prove to be important as support, and only if 4100 is exceeded will chasing this rally over the next few weeks prove correct. SPX above 4025 looks like a poor risk/reward,” Newton added.

In Europe, the Stoxx 600
SXXP,
+0.30%
was barely changed as traders eyed monetary policy decisions from the European Central Bank and Bank of England on Thursday.

Credit: marketwatch.com

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