Stock futures traded higher on Wednesday morning after another hot inflation reading sent key averages to their worst day since June 2020 and dented investors’ expectations of a less hawkish Federal Reserve.
Futures linked to the Dow Industrial Average last added 40 points, or 0.13%, while S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.18%.
The Dow closed 1,276.37 points, or 3.94%, at 31,104.97 during the regular trading session on Tuesday, while the S&P 500 fell 4.32% to 3,932.69. The Nasdaq Composite fell 5.16% to 11,633.57. All major averages snapped four-day winning streaks.
Market movements followed August’s Consumer Price Index report shows headline inflation Despite a drop in gas prices, it rose 0.1% on a monthly basis.
The tepid inflation report raised questions about whether stocks will return to June lows or fall further. It also fueled some fears that the Federal Reserve might May rise even higher Markets are pricing in more than 75 basis points.
“It caught the market off guard,” said Quincy Crosby of LPL Financial. “The market was expecting us to at least level out — maybe not move down, but certainly not up.” That’s misdirection and concern, of course, that translates into what it means for the central bank.”
All 30 Dow stocks and the S&P 500 sector ended the session lower, led by communications services. The sector fell 5.6% to end its worst day since February, dragged down by shares of big tech names like Netflix and MetaPlatforms, which fell 7.8% and 9.4%, respectively.
A reading of the producer price index is due on Wednesday morning and could provide further clues on inflation ahead of the central bank’s rate hike meeting next week.