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Market Snapshot: Dow advances over 400 points after CPI data shows cooling inflation in July

U.S. stock futures were inching higher on Wednesday, but with traders wary of making bold bets lest they get caught out by a U.S. inflation report deemed crucial to the market’s short-term trajectory.

How are stock-index futures trading

S&P 500 futures
ES00,
+0.21%

rose 13 points, or 0.3% to 4,138

Dow Jones Industrial Average futures
YM00,
+0.17%

added 79 points, or 0.2% to 32,817

Nasdaq-100 futures
NQ00,
+0.25%

inched up 4 points, or 0.1% to 13,036

On Tuesday, the Dow Jones Industrial Average
DJIA,
-0.18%

fell 0.2% to 32774, the S&P 500
SPX,
-0.42%

declined 0.4% to 4122 — its fourth-straight losing session — and the Nasdaq Composite
COMP,
-1.19%

dropped 1.2%, to 12493, its third consecutive drop.

What’s driving markets

The mood is decidedly cautious as traders await the U.S. consumer-price index (CPI) report due at 8.30 a.m. Eastern.

Equities have been roiled in 2022 — despite bouncing off its mid-June low, the S&P 500 remains down 13.5% for the year to date. The drop has been driven by fears that 40-year high inflation will batter consumer confidence, cause the Federal Reserve to hike borrowing costs aggressively and tip the U.S. economy into recession.

Consequently, investors are eager to see that inflation has peaked. Economists forecast headline year-over-year CPI growth will dip from 9.1% in June to 8.7% last month, mostly the result of lower energy costs.

But many traders fear that if the data shows “core” inflation– 5.9% in June — remains stubbornly high, then the more optimistic tone in stocks seen over much of the past two months will be challenged. Wait and see is thus in vogue.

“Markets seems to be going into today’s all important U.S. CPI a little on the apprehensive side,” said strategists at Deutsche Bank in a note to clients.

“The nervousness is hardly surprising when you consider that these prints have coincided with some of the most volatile market reactions over the past year. Indeed, it was only two months ago that the release sent the S&P 500 to its lows for the year and contributed to the Fed accelerating its hiking pace to 75bps,” Deutsche added.

Ahead of the inflation report the dollar index
DXY,
-0.18%

is down 0.1% to 106.31 and U.S. 10-year Treasury yields
TMUBMUSD10Y,
2.779%

are easing less than 1 basis point to 2.780%.

Also damping sentiment is a recent rash of poorly-received corporate news. There is particular concern about the health of the semiconductor sector after Micron
MU,
-3.74%

followed Nvidia
NVDA,
-3.97%

with a warning about revenues. The PHLX Semiconductor Index
SOX,
-4.57%

fell 4.6% on Tuesday and is down 27.4% so far in 2022.

In addition, a recent rally in badly battered former bull market darlings has come to a juddering halt in the past few sessions — also hurting retail investor confidence. And some are due for more pain on Wednesday.

Shares in crypto exchange Coinbase
COIN,
-10.55%

were down a further 5.5% in premarket action after reporting a billion dollar second quarter loss, and Roblox
RBLX,
-3.17%
,
the videogame group, plunged 17.4% after a key sales metric declined for the second consecutive quarter.

How are other assets faring

Oil futures were softer, with U.S. WTI
CL.1,
-1.18%

off 0.8% to $89.73 a barrel.

Gold
GC00,
-0.08%

fell 0.3% to $1,807 an ounce and bitcoin
BTCUSD,
-0.40%

lost 0.8% to $22,964.

Asia markets were softer following Wall Street’s overnight lead and after data showed China’s inflation at a two-year high. The Shanghai Composite
SHCOMP,
-0.54%

lost 0.5%, Hong Kong’s Hang Seng
HSI,
-1.96%

shed 2.2% and Japan’s Nikkei 225
NIK,
-0.65%

fell 0.65%. In Europe the Stoxx 600
SXXP,
+0.03%

retreated 0.2%.

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