U.S. stock futures point to steady start to a week rich with inflation and central bank catalysts

NEW YORK (Dec 12) U.S. stock futures were barely changed Monday as traders eyed inflation data and a Fed decision that could set the tone for the rest of the year.

• S&P 500 futures ES00, 0.25% dipped just 2 points, or less than 0.1%, to 3934
• Dow Jones Industrial Average futures YM00, 0.15% fell 26 points, or 0.1%, to 33715
• Nasdaq 100 futures NQ00, 0.26% rose 3 points, or less than 0.1%, to 11686

On Friday, the Dow Jones Industrial Average DJIA, -0.90% fell 305 points, or 0.9%, to 33476, the S&P 500 SPX, -0.73% declined 29 points, or 0.73%, to 3934, and the Nasdaq Composite COMP, -0.70% dropped 77 points, or 0.7%, to 11005.

Equity index futures were struggling to gain traction at the start of a week in which inflation, and the monetary authorities’ campaigns to combat it, will be to the fore.

The caution follows a poor performance over the past several sessions as investors continue to fret about higher borrowing costs and their impact on the economy and company earnings.

The S&P 500 is up 10% from the 2022 low but remains down 17.5% for the year to date in the face of the Federal Reserve raising interest rates by 375 basis points since March.

“The recovery in global risk appetite faltered last week, especially in the U.S., where the major indices suffered their biggest setback since September. This week’s agenda is packed with major macro updates that will test sentiment further,” said Ian Williams, strategist at Peel Hunt.

Most important will be the U.S. consumer prices data on Tuesday, followed the day after by the Federal Reserve’s interest rate decision, when the central bank is expected to hike rates by another 50 basis points to a range of 4.25% to 4.50%.

Equity bulls will be hoping inflation can show further signs of cooling, thereby helping the Fed shift to a less aggressive tightening cycle. However, some analysts warned that after last week’s producer prices report came in hotter than expected there is a danger investors may be caught out by a stonger-than-forecast consumer prices index.

“Because the consensus number is relatively low, we may have another Friday’s PPI-like disappointment at tomorrow’s U.S. CPI release, which could further boost the Federal Reserve (Fed) hawks before Wednesday’s FOMC decision, fuel the U.S. dollar, send the U.S. yields higher and the stocks lower,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Traders also have rate announcements from the European Central Bank and Bank of England to consider, both due Thursday. U.K. inflation data, with the year-on-year rate currently at a 40-year high of 11.1%, is set to published the day before. The euro EURUSD, 0.38% and pound GBPUSD, 0.16% are little changed on Monday at $1.2254 and $1.0540, respectively.

U.S. economic updates set for release on Monday include the New York Fed 1 and 5-year inflation expectations for November, due at 11 a.m.. The federal budget for November will be published at 2 p.m., all times Eastern.

MarketWatch