US equity-index futures plunged as the Labor Department’s consumer price index report on Tuesday showed monthly CPI increased at an annual pace of 8.3%, more than economists’ median estimate of 8.1%, underscoring speculation that the Federal Reserve will maintain an aggressive policy stance that will weighing on economic growth and riskier assets.
Inflation in July was 8.5%, which was down from a four-decade high of 9.1% in June.
This is the last major data ahead of the Fed’s 20-21 September meeting.
Slowing inflation may allow the Federal Reserve to consider easing off the brakes. The Fed has raised its benchmark short-term interest rate four times this year.
The CPI report “will likely show pricing pressure relief but will not change the Fed from maintaining an aggressive stance,” Edward Moya of Oanda said in a report.
US central bank may deliver another 75 bps rate hike
Economists polled by Reuters said the US central bank will deliver another 75-basis-point interest rate hike next week and likely hold its policy rate steady for an extended period, although the rate outlook for the September meeting could change if inflation drops.
Markets are currently pricing in an 87% chance of a 75-basis-point increase in rates.
Before the opening bell, the benchmark S&P 500 index and the Dow Jones climbed. At 06:40 am ET, Dow e-minis were up 170 points, or 0.52%, S&P 500 e-minis were up 22.5 points, or 0.55%, and Nasdaq 100 e-minis were up 65.75 points, or 0.52%.
The benchmark 10-year Treasury yield slipped to 3.31% after a three-day rally, while the two-year yield, which typically tracks interest rate moves, was down at 3.52%.
Oracle Corp rose 1.7% in premarket trading after the enterprise software maker met Wall Street targets for first-quarter revenue.
On Monday, the S&P 500 index rose 1.1%. The Dow gained 0.7% and the Nasdaq composite rallied 1.3%.
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