U.S. stock futures climb as ‘make or break’ CPI swings into focus

Monday’s selloff knocked 654 points off the Dow, while the S&P 500 declined 3.2%, closing below the 4,000 to the lowest since March 31, 2021. The Nasdaq sank 4.3% to its lowest finish since November 2020.

What’s driving markets?

Investors are waiting for the hottest data point of the week — April consumer prices, which are expected to have climbed 8.1% annually from 8.6% the previous month, according to a survey of economists by Dow Jones and The Wall Street Journal.

It would mark the first time in five months the index hasn’t climbed at the fastest rate in 40 years. Core prices are due to rise 0.4% from a 0.3% gain in March, when the data is released at 8:30 a.m. Eastern Time.

The data could be “make or break” for what has been volatile stock markets, Ipek Ozkardeskaya, senior analyst at Swissquote Bank, told clients in a note.

A soft inflation read would bring relief on the view the Federal Reserve’s efforts to tame inflation are working and don’t need to get more aggressive, she said.

“In which case, a couple of 50-bp hikes and the announced balance sheet reduction should suffice to deal with inflation and cool the hawkish Fed expectations,” said Ozkardeskaya.

“If however, inflation hasn’t pulled lower as expected — and worse, if we see a higher figure than last month print, we would see another big wave of selloff across all assets, as a persistent rise in inflation from the actual levels would get investors to bet for a 75-bp hike from the Fed in a next meeting,” said the analyst.

Opinion: The Fed doesn’t deserve all of the blame for this inflation surge

The federal budget for April is due at 2 p.m. Eastern Time.

Some positive sentiment could also be fueled by reports that COVID cases were easing in Beijing and Shanghai, driving hopes for an easing of restrictions and pressure on the global economy. Optimism that that could relay to improved demand drove West Texas Intermediate crude
CL00,
+4.30%

CL.1,
+4.30%

CLM22,
+4.30%
to a gain of more than 3% to $102.96 a barrel, with Brent crude
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BRNN22,
+4.01%
up over 3% to $105.90 a barrel.

Read: Ukrainians make gains in east, as country halts Russian gas at one hub

Separately, data showed China’s consumer-price index rose 2.1% in April from a year earlier, picking up from March’s 1.5% increase.

As stock futures rose, Treasury yields
TMUBMUSD10Y,
2.934%

TMUBMUSD02Y,
2.594%
were down.

The U.S. dollar
DXY,
-0.30%
was weaker, notably against the euro
EURUSD,
+0.14%
after European Central Bank President Christine Lagarde said the first interest rate increase in the bloc could come weeks after the end of the central bank’s bond-buying program.