Futures edge higher ahead of monthly inflation data

[July 11, 2023]  By Johann M Cherian and Bansari Mayur Kamdar

(Reuters) - U.S. stock index futures inched higher on Tuesday ahead of key inflation data that could support a sooner-than-expected end to the Federal Reserve's rapid interest-rate hikes.

The latest data is expected to show consumer prices cooled on an annual basis in June, which could influence bets on another rate hike after the July meeting.

Investors have already raised their expectations of a 25 basis-point rate hike later in July after last week's jobs report pointed to a resilient U.S. economy.

Market participants will also keep a close tab on comments from several central bank policymakers who are expected to speak during the week.

In the previous session, the main U.S. stock indexes closed a choppy session slightly higher after Fed officials signaled the central bank was nearing the end of its monetary tightening cycle.

"Hopes have risen that we are approaching the end of the current monetary policy tightening cycle after several members of the Fed suggested interest rates are approaching their peak," said Joshua Warner, market analyst at City Index.

The yield on two-year U.S. Treasury notes, which move in line with short-term interest rate expectations, ticked further down from a 16-year high.

The inversion between the closely watched two- and 10-year part of the yield curve narrowed further ahead of the much awaited data. [US/]

In premarket trading, most growth stocks such as Tesla, Amazon.com, and Alphabet edged up between 0.3% and 0.9%, recovering from Monday's losses as Nasdaq Inc said it would rebalance its Nasdaq 100 index to address the benchmark's "overconcentration."

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 29, 2023. REUTERS/Brendan McDermid/File Photo

"The impact (of the rebalance) may be modest," said Art Hogan, chief market strategist at B Riley Wealth.

"The big-cap Nasdaq index is going to adjust weightings vs. a full addition or deletion. Also, far more money tracks the S&P 500, which is why S&P 500 component changes get a lot more attention than Nasdaq 100 moves."

At 07:04 a.m. ET, Dow e-minis were up 7 points, or 0.02%, S&P 500 e-minis were up 4.75 points, or 0.11%, and Nasdaq 100 e-minis were up 25 points, or 0.16%.

Most big banks also gained, with JPMorgan Chase rising 1.1% after Jefferies upgraded the stock to "buy" ahead of earnings later this week.

Wall Street banks are expected to report higher profits for the second quarter as rising interest payments offset a downturn in dealmaking.

The S&P 500 banks index has shed 9% so far this year in the aftermath of the biggest crisis since 2008 that pummeled regional lenders. The sub-index is underperforming the benchmark S&P 500 index, which has notched a 14.9% gain.

Zions Bancorp and Truist Financial fell 2.2% and 0.8%, respectively, after Jefferies cut its rating on the banks to "hold".

(Reporting by Johann M Cherian and Bansari Mayur Kamdar in Bengaluru; Editing by Shinjini Ganguli and Arun Koyyur)

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