US Futures Edge Lower Ahead of Key Inflation Data: Markets Wrap

(Bloomberg) — Equity futures pointed to a slightly softer open for Wall Street, as traders awaited inflation data that could show whether the Federal Reserve will opt for a slower pace of interest-rate cuts.

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Contracts on the S&P 500 were down 0.2% after the index hit a record high on Wednesday. Ten-year Treasury yields held above 4%, near the highest levels since end-July. Bloomberg’s dollar index was steady after an eight-day streak of gains, its longest since April 2022.

US consumer price data is expected to show inflation moderated further in September, supporting the view that the Fed will continue easing policy in the coming months. But a surprisingly strong jobs print for last month has forced traders to dial back rate-cut bets, with many expecting a 25-basis-points reduction in November

A strong inflation reading could change the reaction function from the Fed, Bénédicte Lowe, a strategist at BNP Paribas Markets 360, said on Bloomberg TV.

“Given that equities are near all-time high in the US, close to multi-year highs in Europe, the risks are more skewed to the downside if we get a pick-up in inflation from here,” Lowe said.

Meanwhile, Delta Air Lines Inc. kicked off the third-quarter earnings season, with profit and sales forecasts falling short of expectations. JPMorgan Chase & Co. and Wells Fargo & Co. are scheduled to report on Friday.

Investors will want to see if profits are robust 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 earnings from a year ago, according to data compiled by Bloomberg Intelligence, down from the 7.9% growth projected on July 12.

Invesco Global Market Strategist Brian Levitt expects companies to surpass the pared-back expectations, keeping the rally going.

“It is a good nominal growth backdrop, investors are sitting there, looking at equity markets saying: all-time highs on the equity market, can I invest?” Levitt told Bloomberg TV. “Peak inflation, peak tightening, peak rates should be good for equities.”

Among Thursday’s equity movers, US insurance stocks rallied in premarket trading after Hurricane Milton weakened to a Category 3 storm, and supply-chain services provider GXO Logistics Inc. rose on the news of a potential sale. Drugmaker Pfizer Inc. slipped after two of its former executives decided not to be involved in an activist campaign against the firm.

In Europe, the Stoxx 600 index was little changed. Brent crude futures strengthened above $77 a barrel, on fear that Israeli retaliation against Iran for its recent missile strikes will trigger all-out war in the Middle East.

Key events this week:

US CPI, initial jobless claims, Thursday
Fed’s John Williams and Thomas Barkin speak, Thursday
JPMorgan, Wells Fargo kick off earnings season for the big Wall Street banks, Friday
US PPI, University of Michigan consumer sentiment, Friday
Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman speak, Friday

Some of the main moves in markets:

Stocks