US stocks are poised for further losses on Thursday as investors brace for another major inflation report after a surprise rise in consumer prices dampened bets on interest rate cuts.
Dow Jones Industrial Average (^DJI) and S&P 500 (^GSPC) futures fell about 0.3%, after a rout that saw the metrics fall about 1%. Contracts tied to the tech-heavy Nasdaq 100 (^NDX) index fell about 0.2%.
Meanwhile, the 10-year Treasury yield (^TNX) was trading at around 4.55%, holding steady after rising to touch its highest level since November on Wednesday.
Stocks fell and bond yields rose after a better-than-expected March CPI report prompted investors to reevaluate expectations about Federal Reserve policy. The market is now pricing in just two rate cuts in 2024, with these coming later in the year than expected. A few analysts believe cuts or even higher interest rates may not be possible, depending on how the economic data shapes up.
Read more: What the Fed's interest rate decision means for bank accounts, CDs, loans and credit cards.
The focus now is on the Producer Price Index reading scheduled for 8:30 a.m. ET to see if wholesale inflation will also prove another sticking point in the Fed's mission to calm price pressures.
High oil prices returned to the forefront amid growing concerns about a possible attack on Israel by Iranian forces. Crude oil futures fell but remained near six-month highs, with WTI (CL=F) trading just below $86 per barrel, while Brent (BZ=F) remained above $90.
The European Central Bank's interest rate decision on Thursday morning could also help set direction, after the US inflation shock eroded hopes for a rate cut in June.
Against this backdrop, there are hopes that Q1 corporate results will provide momentum for stocks, given there are limited signs that higher borrowing costs are slowing earnings. As reports pour in, investors are gearing up for quarterly updates from some of the biggest US banks, including JPMorgan, to start the season in earnest on Friday.
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The day after the CPI sell-off
Yesterday was one of those shocking moments in the markets.
We've all been through worse sessions for stocks and seen more eye-opening economic reports, so it's not that shocking in this context. Investors were surprised by the CPI inflation report, and sold stocks because everyone was selling and saying to sell.
Some calm has returned to the markets this morning, but futures remain under pressure and tension is in the air ahead of the PPI report.
A new survey of US investors from JPMorgan also did not boost sentiment on the Street. You can see below that investor appetite for owning stocks has fallen sharply as interest rate cut hopes have subsided.
Less appetite for owning stocks here. (JP Morgan)
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