Futures tread higher ahead of latest inflation test

[April 10, 2024]  (Reuters) - U.S. stock index futures edged higher on Wednesday in the lead up to a crucial inflation reading that could influence the Federal Reserve's monetary policy path this year.

Investors have dialed down enthusiasm around how much the central bank could cut rates after recent data indicating a robust U.S. economy, along with two firm inflation readings earlier in 2024.

The March reading of the U.S. Consumer Price Index (CPI) is now in focus and is expected to show a rise in headline inflation to 3.4% year-on-year, from 3.2% in February.

The core figure, which excludes volatile components such as food and energy, is expected to ease to 3.7% year-on-year, versus 3.8% in February.

Traders have priced in about 67-basis-point rate cuts by the Fed, according to LSEG data, down from about 150 bps anticipated at the start of the year.

Still, they see a nearly 54% chance of an at-least 25 bps cut in June, according to the CME's FedWatch Tool, down from over 60% last week.

Minutes from the Fed's March meeting, where it stuck to its guidance of three rate cuts this year, are due later in the day and could be key in gauging the central bank's stance on cutting interest rates.

Significantly, Atlanta Fed President Raphael Bostic said in an interview to Yahoo Finance on Tuesday that it was possible the Fed may not cut interest rates at all this year if the progress on inflation stalls and the economy continues to outperform.

Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 5, 2024. REUTERS/Andrew Kelly

The Nasdaq and the S&P 500 posted modest gains in the last session, although declining financial shares weighed ahead of the unofficial start of the first-quarter earnings season.

Banking giants JPMorgan Chase, Citigroup and Wells Fargo are scheduled to report towards the end of the week.

At 5:37 a.m. ET, Dow e-minis were up 24 points, or 0.06%, S&P 500 e-minis were up 2.5 points, or 0.05%, and Nasdaq 100 e-minis were up 16.75 points, or 0.09%.

Most megacap growth stocks ticked higher in premarket trading, with Alphabet, Tesla and Apple up between 0.1% and 0.8%.

Among other individual stocks, U.S.-listed shares of Taiwan Semiconductor Manufacturing Co rose 1% in premarket trading after the chipmaker beat market estimates for first-quarter revenue.

U.S.-listed shares of Alibaba gained over 3% after the company's co-founder Jack Ma penned a lengthy memo to employees on Tuesday, expressing support for the internet giant's restructuring efforts - a rare move from the billionaire, who has been out of the spotlight for a few years.

(Reporting by Shashwat Chauhan in Bengaluru; Editing by Pooja Desai)

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