U.S. futures diverge ahead of key inflation data

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U.S. futures diverge ahead

Highlights

Dow futures rose 0.21%, while S&P 500 futures gained 0.04%.
Nasdaq-100 futures fell 0.33%, leaving U.S. futures mixed.
August producer prices are expected to rise 5.3% year over year.
Higher oil prices and Treasury yields remain key risks for stocks.

Dow Jones Industrial Average futures rose 108 points, or 0.21%, to 52,533, while S&P 500 futures added 3.25 points, or 0.04%, to 7,647. Nasdaq-100 futures fell 97.50 points, or 0.33%, to 29,351.25, according to the latest market data. Investors were awaiting August producer-price figures, CNBC reported.

Inflation data moves into focus

Economists surveyed by Dow Jones expect the producer price index to rise 0.3% from July and 5.3% from a year earlier. The consumer price index follows Friday, with forecasts calling for a 0.4% monthly increase and annual inflation of 3.4%.

Both reports will help shape expectations ahead of the Federal Reserve's Sept. 16 interest rate decision. They also feed into the personal consumption expenditures price index, the Fed's preferred inflation gauge, although that report will not arrive until after the policy meeting.

Energy prices have increased the stakes. Brent crude settled 3.4% higher at $101.21 a barrel on Wednesday, while U.S. West Texas Intermediate gained 3.3% to $96.05. Both benchmarks recorded their highest settlements since May as the U.S.-Iran conflict continued to disrupt energy markets.

Treasury yields pressure equities

The inflation reports arrive after another difficult session on Wall Street. The Dow fell more than 400 points, or 0.7%, on Wednesday, while the S&P 500 declined 0.5% and the Nasdaq Composite lost 0.6%.

Treasury yields added to the pressure. The U.S. 10-year Treasury yield climbed as high as 4.857%, its highest level since November 2023, after the Treasury Department said it would buy back as much as $6 billion of longer-term debt, triple the usual amount.

Higher yields can weigh particularly heavily on technology and other growth stocks by reducing the present value investors assign to future earnings, helping explain the weaker Nasdaq futures Thursday morning.

Inflation could determine the markets' next move

The PPI report will provide the first major test this week of whether inflation pressures are broadening as energy costs rise. A hotter reading could strengthen expectations that the Federal Reserve will need to maintain restrictive monetary policy.

With Brent above $100, the 10-year Treasury yield recently touching 4.857%, and stocks coming off three losing sessions, investors have little room to dismiss another inflation surprise. Thursday's mixed futures therefore reflect a market waiting for economic data rather than signaling a clear rebound.

We also reported markets expect ECB rate hike as inflation reaches 3.3%.

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