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Economists are already forecasting another month of 40-year-high
inflation that could further solidify expectations for a big
rate hike this month.
As central banks move to aggressively raise borrowing costs to
stamp out runaway inflation, fears of an economic downturn have
escalated, sparking one of the worst Wall Street selloff in
decades in the first half of the year.
All three main indexes ended sharply lower on Tuesday, with the
benchmark S&P 500 falling for a third consecutive session, as
fears of a recession were exacerbated by the inversion of the
two year-/10-year yield curve. [US/]
The Labor Department's report, due at 8:30 am ET (1230 GMT), is
expected to show the Consumer Price Index (CPI), which tracks
the prices that urban consumers spend on a basket of goods,
jumped in June on both a monthly and annual basis by 1.1% and
8.8%, respectively.
However, so-called "core" CPI, which excludes volatile food and
energy prices, is seen cooling down to 5.7% year-on-year.
"We think it is unlikely that June CPI will be the first in the
string of softer inflation prints that Fed officials focused on
observing before shifting away from a very hawkish policy
stance," Citi economists wrote in a note.
"Given some recent expectation for slowing inflation through a
steeper growth slowdown or cooling inflation expectations,
markets could still be particularly sensitive to another upside
surprise."
A stronger-than-expected monthly payrolls data cemented
expectations for a 75 basis point rate hike in July, although
growing worries about a recession have tempered bets on how high
the Fed will hike rates.
Traders' bets of a 75 basis points rate hike this month stood at
88.2%, as per CME Group's Fedwatch tool.
JPMorgan Chase & Co and Morgan Stanley will be the first among
big U.S. banks to report quarterly results this week, kicking
off the second-quarter reporting season in earnest.
Earnings reports will be parsed for how companies are coping
with rising costs, with investors also closely watching profit
forecasts to gauge the likelihood of a recession.
At 06:54 a.m. ET, Dow e-minis were up 42 points, or 0.14%, S&P
500 e-minis were up 6.25 points, or 0.16%, and Nasdaq 100
e-minis were up 32 points, or 0.27%.
Twitter Inc rose 1.7% in premarket trading as the social media
company sued Tesla Chief Executive Officer Elon Musk for
violating his $44 billion buyout deal.
(Reporting by Amruta Khandekar in Bengaluru; additional
reporting by Susan Mathew; Editing by Anil D'Silva)
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