US open: Futures mixed following CPI reading

13th Mar 2024 12:36

(Sharecast News) - Wall Street futures were mixed ahead of the bell on Wednesday after the S&P 500 closed at a fresh record high in the previous session.

As of 1245 GMT, Dow Jones futures were up 0.05%, while S&P 500 and Nasdaq-100 futures had the indices opening 0.06% and 0.26% lower, respectively.

The Dow closed 235.83 points higher on Tuesday as investors largely shrugged off an unexpected pick-up in inflation, holding on to hopes that the data won't derail the Federal Reserve's plans to soon start cutting interest rates.

According to the Department of Labor, headline consumer prices increased at a 0.4% month-on-month pace in February, which served to push the year-on-year rate of increase from 3.1% in January to 3.2%, despite economists' expectations for no change. Core CPI also rose, up by 0.4% month-on-month, while the annual rate inched lower to 3.8% from 3.9%, albeit still higher than the 3.7% expected by the market.

February's producer price index was slated for release on Thursday, with the two key pieces of inflation data marking some of the last major macro data points scheduled for release ahead of the Federal Reserve's next monetary policy meeting on 19 March.

Trade Nation's David Morrison said: "Yesterday's crucial inflation update, February's Consumer Price Index, showed numbers going in the wrong direction. The headline year-on-year CPI rose 3.2%. This was higher than expected, and above the +3.1% reading from January. Previously, January's numbers had disappointed, coming in above expectations although still showing an overall decline. That had caused a serious market disruption and a sharp sell-off in risk assets. It's worth noting that Headline CPI has shown no improvement since June last year when it dropped to +3.0% year-on-year. Yesterday we saw an initial knee-jerk sell-off before prices turned higher with the S&P 500 going on to close at a record high.

"It does sometimes happen that the market rallies after the release of an important number, even if it disappoints. It's a sign of relief as much as anything. But it also indicates that path of least resistance is up for now, as investors are not yet ready to call a top. As far as forecasts for the path and timing of Federal Reserve rate cuts are concerned, nothing really changed. The probability of no change at next week's meeting is now 99%, while there's now a 58% likelihood of a 25 basis point cut at the June meeting."

On the macro front, US mortgage applications increased by 7.1% in the week ended 8 March, according to the Mortgage Bankers Association of America, cooling off slightly from the prior week's 9.7% rise. Applications to buy a home advanced 4.7%, while those to refinance a home loan jumped 12.2%. Elsewhere, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased 18 basis points to 6.84% - the lowest level seen in five weeks.

In the corporate space, Dollar Tree shares were in the red before the open after posting disappointing quarterly earnings, while Tesla shares headed south on the back of a downgrade from analysts at Wells Fargo.

Reporting by Iain Gilbert at Sharecast.com