By Johann M Cherian and Ankika Biswas
(Reuters) -U.S. stock index futures fell on Tuesday as investors braced for an inflation print that could threaten to halt the ongoing market exuberance and offer clues on the timeline for interest rate cuts.
Focus is pinned on the trajectory of the consumer price index in January, following a modest revision to inflation in the last quarter of 2023 that left investors broadly relieved.
Economists polled by Reuters expect consumer inflation to rise 2.9% annually in January after 3.4% growth in December. Excluding volatile items like food and energy, prices are forecast to rise 3.7%, easing from a 3.9% increase in December.
“CPI data is likely to trigger some volatility across markets. If the data comes in higher than expected, we suspect an intense downside pressure on stocks,” said Joel Kruger, market strategist at LMAX Group.
The Cboe volatility index hit a one-week high, reflecting some anxiety on Wall Street ahead of the data.
At 7:06 a.m. ET, Dow e-minis were down 66 points, or 0.17%, S&P 500 e-minis were down 21.75 points, or 0.43%, and Nasdaq 100 e-minis were down 146.5 points, or 0.82%.
With a March rate cut unlikely against the backdrop of a resilient economy, bets for the first reduction are concentrated around May and June, with the odds for the former at 56%, down from above 95% in early January, the CME FedWatch tool showed.
“Despite the quiet currency market and a recent less dovish repricing of rate expectations, U.S. equities have continued to extend their record run of gains. This is concerning as it looks like investors keep ignoring the signs and keep pushing for accommodative policy at all costs,” Kruger added.
Wall Street has been on a rally, with the benchmark S&P 500 gaining in 14 out of the past 15 weeks, the first time since March 1972. The Dow is also trading at a record high level, and on Monday the Nasdaq briefly surpassed its record closing high from November 2021.
Hopes of imminent policy easing this year had kicked off the rally in November 2023, further boosted by signs of healthy corporate performance. Markets also continue to reward megacaps that have led the recent hype around artificial intelligence, as Nvidia briefly surpassed Amazon.com in market value on Monday.
Investors are also cheering robust economic performance, where a Bank of America survey showed they have cut cash levels and boosted equity allocations as they no longer expect an economic recession for the first time since April 2022.
Among premarket movers, JetBlue Airways jumped 14.7% after activist investor Carl Icahn reported a 9.91% stake, adding that the carrier’s stock is ‘undervalued’.
Arista Networks shed 7.2% after the cloud solutions provider forecast current-quarter adjusted gross margin below expectations.
Software firm Cadence Design Systems dropped 7.9% following a bleak quarterly sales forecast, while toymaker Hasbro lost 12.3% after a steeper-than-expected drop in holiday-quarter sales and profit.
Tripadvisor jumped 11% as the online travel agency formed a special committee to evaluate proposals that may result in a deal.
(Reporting by Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Maju Samuel)