S&P 500 futures slipped ahead of Tuesday’s June inflation report as bond traders raised their bets on a July Fed rate hike. A shaky AI trade, climbing oil prices, and a renewed US-Iran conflict added to the caution.
US stock futures fell on Tuesday morning as traders lifted their bets on a Federal Reserve rate hike ahead of a key inflation report. Futures on the S&P 500 declined 0.2% in premarket trading, matching a 0.2% dip in Dow Jones Industrial Average contracts. Nasdaq 100 futures shed 0.3%, extending Monday’s tech-led losses.
Traders raise their July rate-hike bets
Investors were waiting on the Consumer Price Index report at 8:30 a.m. ET. Economists expect consumer price inflation cooled in June, yet that has not stopped bond traders from raising bets that the Fed will hike rates at its July 28-29 meeting.
That repricing has been sharp. Traders now see a 43% chance of a 25 basis point rate hike, up from 25% a week earlier, according to CME Group’s FedWatch. On Monday, Fed Governor Christopher Waller called monetary policy a “crossroads,” according to Reuters, and said he would treat another hot inflation reading as signal rather than noise.
AI chips and oil weigh on sentiment
Rate-hike speculation, capex spending concerns, and profit-taking have pushed AI chip stocks lower. Newly listed US shares of South Korea’s SK Hynix dropped further after a US IPO on Friday.
Oil added to the unease. Brent crude edged higher after its biggest single-day jump on Monday, with the US set to begin enforcing a blockade of the Strait of Hormuz on Tuesday afternoon and charge a 20% fee on all cargo crossing the waterway, reviving concerns that an energy shock could flow through to core inflation.
Bank earnings set the tone
Second-quarter results from JPMorgan, Bank of America, Wells Fargo, Citigroup, and Goldman Sachs land this morning. Analysts expect the estimated year-over-year earnings growth rate for the S&P 500 to reach 23.3%, well above its five-year average of 16.4%. Hitting that mark would extend the index to a seventh straight quarter of double-digit growth.
Source: Yahoo Finance
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