U.S. Stock Index Futures Dip Ahead of Inflation Report

By Johann M Cherian and Purvi Agarwal

(Reuters) – U.S. stock index futures inched lower on Friday as investors refrained from making big bets ahead of a crucial inflation report that could influence expectations regarding upcoming interest rate cuts by the Federal Reserve.

The Commerce Department’s report, due at 8:30 a.m. ET, is expected to show that the personal consumption expenditure index – the Fed’s preferred inflation metric – rose by 2.3% in August, down from 2.5% the previous month, according to economists polled by Reuters.

Moderating inflation towards the central bank’s 2% target has granted the Fed ample room to commence its policy easing cycle with a 50 basis point rate cut last week. The emphasis now is to ensure that unemployment rates do not spike.

Strategists at ING Bank noted, “Even with a small deviation from consensus, the recent shift in the Fed’s focus to the employment side of its mandate means that markets are less sensitive to inflation news.”

Data throughout the week indicates a resilient economy overall, leaving traders uncertain about the Fed’s next steps. According to CME Group’s FedWatch Tool, the odds of another significant move at the central bank’s November meeting are at 50.8%, while those for a 25 basis point reduction stand at 49.2%.

At 6:58 a.m. ET, Dow E-minis were down by 22 points, or 0.05%, S&P 500 E-minis were down by 7 points, or 0.12% and Nasdaq 100 E-minis were down by 53.75 points, or 0.26%.

Futures linked to the Russell 2000 index, which tracks small caps, were 0.2% higher.

The University of Michigan’s final September estimate on consumer sentiment and remarks from Fed Governor Michelle Bowman are also significant today.

Late on Thursday, Fed Governor Lisa Cook indicated that the Fed’s unique action earlier this month could address increased “downside risks” to employment.

Wall Street’s primary indexes closed higher in the previous session, with the S&P 500 finishing at record highs after an upbeat forecast from Micron invigorated optimism surrounding artificial intelligence. The benchmark index, along with the blue-chip Dow and tech-heavy Nasdaq, is on track for its third consecutive week of gains.

Among other stocks, Bristol Myers Squibb surged 6% after the U.S. FDA approved its schizophrenia drug, providing a treatment option that alleviates symptoms without common side effects. Conversely, Costco Wholesale dropped 1.3% after falling short of market expectations for fourth-quarter revenue, impacted by cautious consumer spending on pricier items and lower gasoline prices. Dollar General slipped 2.1% after Citigroup downgraded it to “sell” from “neutral”.

U.S.-listed shares of Chinese firms like Alibaba rose 0.7%, PDD Holdings climbed 2.2%, and NetEase gained 2.1% after China’s central bank lowered interest rates and injected liquidity into the banking system in a new stimulus move. Additionally, miners such as Albemarle added 2.8% and U.S.-listed shares of BHP rose 1%, following reports that major Chinese cities like Shanghai and Shenzhen are planning to lift crucial remaining restrictions on home purchases to attract potential buyers.