Key Takeaways
U.S. stock futures fell Tuesday morning, with tech-heavy contracts leading declines, as traders awaited a crucial inflation report expected to show the highest price pressures in a year. Contracts on the Nasdaq 100 slid 0.8%, while S&P 500 futures were down 0.4% and Dow Jones Industrial Average futures dipped 0.1%.
"Key Inflation data will be released this week and the stakes couldn’t be higher," Jay Woods, Chief Market Strategist at Freedom Capital Markets, said in written commentary. "All the focus has been on earnings season. Now we get to turn our attention back to good old economic data. If reaction to Friday’s jobs data was any indication, then just wait to see what volatility hotter inflationary data could cause."
The caution in the market comes ahead of the Bureau of Labor Statistics' Consumer Price Index reading for April, due at 8:30 a.m. ET. Economists forecast a 3.8% year-over-year increase, a significant jump from March's 3.3% annual rate. Core inflation, which strips out volatile food and energy, is expected to rise to 2.7%. The move in equities was mirrored by a rise in the 10-year Treasury yield to 4.43% and a 0.3% gain in the U.S. dollar index to 98.24.
The inflation data is the latest test for a market that has seen the S&P 500 and Nasdaq close at record highs to start the week. A higher-than-expected reading could reinforce the Federal Reserve's decision to hold interest rates steady, potentially dampening the recent rally, especially in rate-sensitive tech and growth stocks.
The primary driver behind the expected surge in inflation is energy costs. West Texas Intermediate futures climbed 3.8% to $101.80 a barrel, while the global benchmark, Brent crude, rose 3.7% to $108. The gains followed President Donald Trump's comments that a ceasefire with Iran was "on massive life support," sustaining concerns about the security of oil supply through the Strait of Hormuz. According to AAA, gasoline has risen more than $1.50 a gallon since the war began, directly impacting household budgets and transportation costs for goods.
"The ongoing conflict in the Middle East has kept energy prices elevated, which will start to generate more obvious spillovers into other areas of inflation," economists at Wells Fargo Securities wrote in a commentary.
The risk-off mood was evident across pre-market trading. All of the Magnificent Seven tech giants pointed lower. Nvidia (NVDA), which set an all-time high on Monday, was down nearly 1%.
Chipmakers Intel (INTC) and Micron Technology (MU), which also reached record highs Monday, pointed down 3.5% and 2.5%, respectively.
In other corporate news, GameStop (GME) shares fell nearly 5% in premarket trading after eBay (EBAY) rejected its unsolicited $56 billion takeover offer. Hims & Hers Health (HIMS) shares sank 15% after reporting an unexpected net loss.
This article is for informational purposes only and does not constitute investment advice.
