US Stock Futures Slump Before US Inflation Report: Markets Wrap

(Bloomberg) — US equity futures slumped before the release of keenly awaited inflation data that could set the stage for the timing of the Federal Reserve move to interest-rate cuts. Treasuries rose.

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Contracts on the rate-sensitive Nasdaq 100 slid 0.6% while those on the S&P 500 fell 0.4%, extending Monday’s decline in the main US stock gauge from a high of near 5,050. Nvidia Corp. dropped 1% in premarket trading.

The inflation report, which is expected to show the first reading below 3% on year-over-year headline inflation since March 2021, may not be enough to justify a more rapid shift to monetary easing. Employment, manufacturing and economic growth in the US have surprised on the upside, proving resilient to the fastest rate increases in a generation.

“Despite expecting CPI to print below 3% later, we still think the market is over-exuberant when it comes to when that first cut comes in,” Grace Peters, head of global investment strategy at JPMorgan Private Bank, said in an interview with Bloomberg TV.

Investors are taking a breather after optimism about corporate earnings, driven by a combination of resilient US growth and expected interest-rate cuts, pushed the market to technically overbought territory. Allocation to US equities has risen, with exposure to the tech industry at the highest since August 2020, according to a Bank of America Corp. global survey of fund managers.

Read: BofA Survey Shows Investors Are All In on US Tech Stock Rally

Policy makers, meanwhile, are driving home the message that rate-cut bets have become overblown. Federal Reserve Bank of Richmond President Thomas Barkin Monday warned US businesses accustomed to raising prices in recent years may continue to fan inflation. The market is overlooking the risk of rate increases following the easing cycle, strategists at Citigroup Inc. warned Monday.

Derivatives markets point to the first fully-priced quarter-point rate cut in June, with three more to follow in 2024, taking the Fed Funds Rate lower by 1 percentage point by December, according to data compiled by Bloomberg.

Corporate Highlights

ZoomInfo Technologies shares soared in premarket trading after the infrastructure software company reported fourth-quarter revenue that beat consensus estimates.
Arm Holdings Plc extended a three-day rally that has driven its value up almost 100%, after a blockbuster earnings report last week showed artificial intelligence spending is bolstering sales.
JetBlue shares jumped 14% after activist investor Carl Icahn disclosed a 9.91% stake in the airline and said he had held talks with management about the possibility of representation on the board.
Arista Networks Inc. shares fell 7.1% after the cloud networking company’s first-quarter results and outlook were seen by some as underwhelming, given AI-related expectations.
Michelin rallied after the tiremaker’s earnings and a share buyback announcement.

Key Events This Week

Germany ZEW survey expectations, Tuesday
US CPI, Tuesday
Eurozone industrial production, GDP, Wednesday
BOE Governor Andrew Bailey testifies to House of Lords economic affairs panel, Wednesday
Chicago Fed President Austan Goolsbee speaks, Wednesday
Fed Vice Chair for Supervision Michael Barr speaks, Wednesday
Japan GDP, industrial production, Thursday
US Empire manufacturing, initial jobless claims, industrial production, retail sales, business inventories, Thursday
ECB President Christine Lagarde speaks, Thursday
Atlanta Fed President Raphael Bostic speaks, Thursday
Fed Governor Christopher Waller speaks, Thursday
ECB chief economist Philip Lane speaks, Thursday
US housing starts, PPI, University of Michigan consumer sentiment, Friday
San Francisco Fed President Mary Daly speaks, Friday
Fed Vice Chair for Supervision Michael Barr speaks, Friday
ECB executive board member Isabel Schnabel speaks, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.4% as of 6:31 a.m. New York time
Nasdaq 100 futures fell 0.6%
Futures on the Dow Jones Industrial Average fell 0.1%
The Stoxx Europe 600 fell 0.4%
The MSCI World index rose 0.1%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0779
The British pound rose 0.3% to $1.2673
The Japanese yen was little changed at 149.44 per dollar

Cryptocurrencies

Bitcoin was little changed at $49,861.45
Ether rose 1.4% to $2,668.63

Bonds

The yield on 10-year Treasuries declined two basis points to 4.16%
Germany’s 10-year yield declined two basis points to 2.34%
Britain’s 10-year yield was little changed at 4.06%

Commodities

West Texas Intermediate crude rose 0.9% to $77.60 a barrel
Spot gold rose 0.4% to $2,028.45 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from James Hirai, Divya Patil and Krystof Chamonikolas.