Wall Street futures tick up with inflation data on the way

Wall Street inched slightly higher early Wednesday ahead of the release of key inflation data likely to influence the Federal Reserve’s stance on interest rates.

Futures for the Dow industrials picked up nearly 0.2% and futures for the S&P 500 ticked up 0.1%

“Broader markets remain laser-focused on this week’s critical inflation data as market participants attempt to tease out the state of the economy and the course the Fed might take from here,” Stephen Innes, managing partner at SPI Asset Management, said in a report.

The biggest immediate question for Wall Street has been whether the Federal Reserve will keep hiking interest rates in its attempt to get high inflation under control. It’s already raised rates at a furious pace over the last year, enough to slow some areas of the economy and for strains to appear in the banking system.

Economists expect Wednesday’s report on consumer inflation to show it slowed to 5.2% in March from 6% in February. That’s continued progress since inflation peaked last summer, but still well above the Fed’s target.

A higher reading than expected would likely raise expectations the Fed will raise rates by another quarter of a percentage point at its next meeting in May. Higher rates can undercut inflation, but in slowing the economy they raise the risk of a recession and hurt prices for stocks and other investments.

Tim Waterer, chief market analyst at Kohle Capital Markets, said traders were generally upbeat during Asian trading.

“But it’s fair to say that the buoyant mood also comes with an air of caution given the importance and potentially policy-influencing impact of the U.S. inflation data this week,” he said.

In Europe, France’s CAC 40 added 0.4%, Germany’s DAX edged up 0.2% and Britain’s FTSE 100 climbed 0.6%.

In Asian trading, Japan’s benchmark Nikkei 225 rose 0.6% to finish at 28,082.70. Australia’s S&P/ASX 200 added 0.5% to 7,343.90. South Korea’s Kospi edged up 1% to 2,550.64..

Hong Kong’s Hang Seng index lost 0.9% to 20,309.86 and the Shanghai Composite index added 0.4% to 3,327.18.

On Wall Street on Tuesday, the S&P 500 had its smallest one-day move in more than a year, slipping 0.17 points, or less than 0.1%. Most of the stocks in the index rose, as did the Dow Jones Industrial Average, which gained 0.3%. The Nasdaq composite slipped 0.4%.

Bond traders have been jittery over the Fed possibly going too far on rates and then having to cut them as soon as this summer in order to prop up the economy. The stock market has remained more resilient, helped by hopes the Fed could thread the needle and raise rates just enough to stifle inflation without causing a severe downturn.

Still-high inflation is one of the reasons analysts expect this upcoming earnings reporting season to show the worst drop since the depths of the pandemic in 2020. A bunch of banks will help kick off the earnings reporting season when they tell investors on Friday how much they earned during the first three months of the year.

Investors will get updates on what CEOs say about current and upcoming conditions. One fear is that banks in particular could pull back on their lending following all the turmoil in their sector, caused in part by the past year’s swift leap in interest rates.

If they do cut off lending to businesses, that could further slow the economy and raise the risk of a recession.

In energy trading, benchmark U.S. crude shed 8 cents to $81.45 a barrel in electronic trading on the New York Mercantile Exchange. It advanced $1.79 per barrel to $81.53 per barrel. Brent crude, the international standard, rose 7 cents to $85.68 a barrel.

In currency trading, the U.S. dollar ticked up to 133.71 Japanese yen from 133.70. The euro cost $1.0931, up from $1.0912.

Kageyama reported from Tokyo; Ott reported from Silver Spring, Maryland.

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