U.S. stock futures crept lower ahead of data that are expected to show the largest annual increase in prices in four decades, underscoring the broad inflation pressures affecting the economy.
Futures for the S&P 500 ticked down 0.1% in choppy trading Wednesday. The broad-market index rose Tuesday, snapping a five-day losing streak. Contracts for the tech-focused Nasdaq-100 fell 0.2%, and futures for the Dow Jones Industrial Average were flat Wednesday.
The yield on the benchmark 10-year Treasury note was unchanged from 1.745% Tuesday, when the rally in government bond yields halted.
The U.S. consumer-price index, a key measure of inflation, is forecast to top 7% annually for the first time since 1982 when figures for December are released at 8:30 a.m. ET.
In a confirmation hearing for his second term as Federal Reserve chairman, Jerome Powell said the central bank would use its tools to tamp down inflation. Photo: Graeme Jennings/Press Pool
The Federal Reserve appears poised to lift interest rates as soon as March due to concerns over a tight labor market and elevated inflation. Fed Chairman Jerome Powell called high inflation a “severe threat” to a full economic recovery Tuesday and said the central bank was preparing to raise interest rates because the economy no longer needed emergency support.
Stocks have seen choppy trading this week as investors assess the potential impact of sooner-than-anticipated rate rises and await clarity on when inflation may peak. When interest rates are low, investors tend to load up on risk assets such as stocks to generate returns. When inflation accelerates and policy makers raise rates, the value of companies’ future earnings drops and investors have more alternatives for places to make money. This particularly hurts technology stocks that promise expanding future profits.
“Inflation is uncomfortably high and this has had a negative impact on growth stocks,” said Luca Paolini, chief strategist at Pictet Asset Management. He is waiting to see if higher inflation weighs on profits in the coming earnings season.
Overseas, the pan-continental Stoxx Europe 600 gained 0.4%, led by gains in the basic resources and oil and gas sectors.
Major stock indexes jumped by the close of trading in Asia. Hong Kong’s Hang Seng surged 2.8%, and China’s Shanghai Composite rose 0.8%. Japan’s Nikkei 225 and South Kroea’s Kospi rallied 1.9% and 1.5%, respectively.
