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Stock index futures fell Thursday, while yields were nearly flat, a day after hotter-than-expected inflation data dampened hopes for rate cuts in June.
S&P 500 Futures (SPX) -0.4%Nasdaq 100 futures (NDX:IND) -0.4%and Dow futures (HINDU) -0.4%.
Rates remained almost unchanged, a day after US Treasury bond yields have skyrocketed higher. The 10-year Treasury yield (US10Y) rose 1 basis point to 4.55%, while the 2-year yield (US2Y) remained unchanged at 4.97% on Thursday.
The consumer price index rose 0.4% in March, the same increase as February, beating the 0.3% increase economists had expected.
March’s warm inflation data highlighted the sticky nature of inflation in the first quarter of 2024 and will likely mean the Federal Reserve will be in no rush to ease policy.
“Markets saw an aggressive sell-off yesterday as another upside surprise in US inflation led to a collapse in both bonds and stocks,” said Deutsche Bank’s Henry Allen.
It is becoming increasingly difficult to dismiss this as merely a temporary increase, and the main concern is that inflation is remaining persistently above the Fed’s target, Allen added.
“Our baseline inflation scenario remains optimistic, as all six drivers of the post-Covid surge appear benign,” Pantheon Macroeconomics said.
“The March FOMC minutes and the March CPI suggest that the marriage between the FOMC and disinflation is heading for a divorce… The fact is, you can’t get back to 2% inflation without significantly higher growth. slower, no matter how you want to analyze a month’s performance of inflation data,” said Steven Blitz, economist at GlobalData TS Lombard.
All eyes will be on the March Producer Price Index, which is due before the bell today. Economists expect the PPI to have risen 0.3% last month, an annual increase of 2.2%.
“We believe March PPI was limited by declines in retail and wholesale gross margins, captured in the commercial services component, which represents nearly a quarter of core PPI,” Pantheon Macro said.
The initial weekly jobless claims report is also expected to be released around the same time, which is expected to show a decline to 216,000.