US Stock Futures Muted Hours Before Inflation Data Release: Analyst Sees S&P 500 Likely Retesting Highs On Milder CPI Reading

Zinger Key Points
  • This week’s CPI report might serve as a catalyst for helping SPX break back higher out of its recent range, says FundStrat analyst.
  • Economists, on average, expect a downtick in the annual core inflation rate to 3.7%.

Stock futures are all in the green early Wednesday as traders factor in tame March inflation data. A hotter-than-expected number may not result in a big pullback, given the recent consolidation, said value investor and New York University Professor Aswath Damodaran. If the data meets expectations or comes in tamer than expected, pent-up buying could result in positioning the market to retest its highs.

Traders may also react to the Fed minutes due later in the day and a few Fed speeches.

Futures Performance On Wednesday ( as of 6:30 a.m. EDT)

FuturesPerformance (+/-)
Nasdaq 100-0.04%
S&P 500+0.03%

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY edged up 0.04% to $519.51, and the Invesco QQQ ETF QQQ slipped 0.01% to $442.17 according to Benzinga Pro data.

Cues From Previous Session:

Stocks went about in a lackluster manner on Tuesday, with the movement typical of a pre-inflation session. The major indices ignored a positive start and languished mostly below the unchanged. The pullback in bond yields helped nudge the indices higher in the final minutes of trading. While the Dow Industrials and the S&P 500 Index ended higher for the day, the Dow Industrials was marginally lower at the close, as interest-rate sensitive financial stocks and Boeing Co. BA served as drags.

IndexPerformance (+/-)Value
Nasdaq Composite+0.32%16,306.64
S&P 500 Index+0.14%5,209.91
Dow Industrials-0.02%38,883.67
Russell 2000+0.34%2,080.80

Insights From Analysts:

Economist Mohamed El Erian said sector performance is worth watching, including the extent to which inflation in the services sector is moderating. This is an “important issue given what is likely to be the continued reversal in the goods disinflation that has done the heavy lifting in bringing high inflation down,” he said.

Earlier this week, Jeremy Siegel, Emeritus Professor of Finance at the Wharton Business School and Senior Economist at WisdomTree, said a lower-than-expected year-over-year core rate could bring a nice rally.

The view was echoed by FundStrat’s Global Head of Technical Strategy Mark Newton. In a report released Monday, the analyst said, “This week's CPI report might serve as a catalyst for helping SPX break back higher out of its recent range.”

“Unless last Thursday's lows are broken (SPX_5146) it's much more likely that SPX pushes back higher over 5254.38 close from 3/28 to make a new high,” he added.

Upcoming Economic Data:

The Labor Department is all set to release its March consumer price inflation report at 8:30 a.m. EDT.

Economists generally predict a slight slowdown in the month-over-month inflation rate, with consumer prices and the core reading potentially rising by 0.3% in March compared to 0.4% in February.

However, on a year-over-year basis, inflation is expected to pick up slightly, with an average forecast of 3.4% growth compared to 3.2% in February. The core annual rate, which excludes volatile food and energy prices, might show a slight decrease from 3.8% to 3.7%

Fed Governor Michelle Bowman is scheduled to speak at 8:45 a.m. EDT, Chicago Fed President Austan Goolsbee and Richmond Fed President Thomas Barkin, both at 12:45 p.m. EDT

The Commerce Department is due to release its wholesale trade and inventories at 10 a.m. EDT. Economists, on average, expect a 0.5% month-over-month increase in wholesale inventories for February, reversing the 0.3% decline in January.

The Energy Information Administration will release its customary weekly petroleum status report at 10:30 a.m. EDT.

The Treasury is set to auction 10-year notes at 1 p.m. EDT.

The Fed will release the minutes of its March Federal Open Market Committee meeting at 2 p.m. EDT. At the meeting, the central bank announced a pause decision but signaled through the dot-plot chart and Chairman Jerome Powell’s post-meeting press conference that rate cuts could be coming this year.

See also: Best Futures Trading Software

Stocks In Focus:

  • PriceSmart, Inc. PSMT rose over 4.50% in premarket trading following the release of its quarterly results.

Commodities, Bonds, and Global Equity Markets:

Crude oil futures were back on the way higher after declining in the previous two sessions. They rose moderately to around $85.5 per barrel Wednesday. Gold futures rose but traded off Tuesday’s intraday highs. The yield on the benchmark 10-year Treasury held below around 4.35% levels.

Bitcoin BTC/USD was weaker as the apex crypto slid under the $69,000 level.

Sentiment across the global equity market was positive, with the major Asian markets that were open for trading ending mostly higher. Chinese and Taiwanese markets, however, bucked the downtrend. The Malaysian, Singaporean and South Korean markets were closed for the holidays. The Reserve Bank of New Zealand announced a pause decision for a sixth straight meeting.

European stocks advanced solidly in early trading.

Read Next: Traders Brace For Inflation Data, June Rate Cut Hopes Hang By Thread: 10 ETFs That Could Be Volatile Wednesday

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