Stock Futures Rise Ahead of Inflation Data This Week

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U.S. stock futures edged higher on Monday to start a busy week full of inflation data, which investors will scrutinize amid shifting expectations over when and by how much the Federal Reserve may cut interest rates this year.

Futures for the Dow Jones Industrial Average rose 20 points, or less than 0.1%, after the index gained 125 points last Friday to finish at 39,512. S&P 500 futures advanced 0.1% with contracts tracking the tech-heavy Nasdaq up 0.2%. The yield on the benchmark 10-year U.S. Treasury note ticked down to 4.94%.

The question of when the Fed may lower interest rates from a generational peak continues to loom over markets, with expectations of the first rate being pushed back repeatedly in recent months amid signs of more persistent inflation. Color will be added to the rate-cut narrative in the coming days with closely watched inflation data releases, including the producer-price index (PPI) and consumer-price index (CPI), both of which could advance or disrupt current rate cut expectations.

“The main thing that will light up the skies for markets this week will be U.S. inflation data with April’s PPI (Tuesday) and CPI (Wednesday) the highlights. We’ll see if the higher-than-expected U.S. inflation seen in Q1 extends into Q2 or not,” said Jim Reid, a strategist at Deutsche Bank. “The next most important U.S. data release is Retail Sales on Wednesday.”

Investors also have a busy week of central bank speakers, with Fed Chair Jerome Powell delivering remarks on Tuesday and a spate of other officials on tap. Their remarks, like inflation data, will be in the spotlight for clues over Fed policy and whether the current market pricing of a first rate cut by September is accurate.

“Right now, the market is pricing in a 48% chance of a Fed rate cut in September. However, a weaker than expected CPI report could cause some recalibrating. If the market pushes forward expectations of a rate cut from the Fed, then this could weigh on the dollar,” said Kathleen Brooks, an analyst at broker XTB.