US stock future tumble ahead of crucial CPI data

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 and the dollar were steady.

Contracts on the rate-sensitive Nasdaq 100 slid 0.6% while those on the S&P 500 fell 0.3%, 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.

Policy makers continued to message to markets that rate-cut bets have become overblown. Federal Reserve Bank of Richmond President Thomas Barkin Monday warned that 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 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.

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.

Corporate Highlights

• Arm Holdings Plc gained in premarket trading, extending 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.
• Activist investor Carl Icahn disclosed a 9.91% stake in JetBlue Airways Corp., calling the shares undervalued, and said he’s had talks with management about the possibility of representation on the board.
• 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 0.3% as of 5:40 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 0.3%
• The MSCI World index rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0773
• The British pound rose 0.3% to $1.2667
• The Japanese yen fell 0.1% to 149.50 per dollar

Cryptocurrencies

• Bitcoin rose 0.4% to $50,058.55
• Ether rose 1.7% to $2,678.29

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.17%
• Germany’s 10-year yield declined one basis point to 2.35%
• Britain’s 10-year yield advanced two basis points to 4.07%

Commodities

• West Texas Intermediate crude rose 1.1% to $77.74 a barrel
• Spot gold rose 0.4% to $2,027.16 an ounce

This story was produced with the assistance of Bloomberg Automation.