S&P500 Forecast: U.S. Stock Futures Slip as Inflation Data Clouds Fed Outlook

U.S. Stock Futures Slip Amid Mixed Inflation Data

Major U.S. stock futures saw a decline on Wednesday as traders digested the latest consumer inflation report, trying to gauge its impact on the broader economy.

The Consumer Price Index (CPI) for the previous month rose by 0.2%, with the annual inflation rate coming in at 2.5%, the lowest since February 2021. This figure was in line with market expectations but slightly below the anticipated year-over-year rate of 2.6%.

The core CPI, which excludes volatile food and energy prices, came in slightly higher than expected, causing some uncertainty among investors.

At 13:09 GMT, Dow futures are trading 40642.00, down 156.00 or -0.38%. S&P 500 Index futures are at 5497.50, down 6.50 or -0.12% and Nasdaq futures are trading 18874.25, up 10.25 or +0.05%.

Treasury Yields Edge Higher

In response to the mixed inflation data, U.S. Treasury yields ticked higher. The yield on the 10-year Treasury rose by 2 basis points to 3.667%, while the 2-year yield increased by 4 basis points to 3.646%. The market’s reaction reflects concerns about how the Federal Reserve will respond in its upcoming meeting, scheduled for September 17-18.

While headline inflation came in as expected, the slightly higher core CPI raised questions about the Fed’s potential rate cut, with traders adjusting their positions accordingly. The CME Group’s FedWatch Tool showed an 83% chance of a 25-basis-point cut, though 17% still expect a 50-basis-point reduction.

Solar Stocks Gain on Debate Sentiment

Solar energy stocks, including First Solar and Enphase Energy, surged in premarket trading following the U.S. vice-presidential debate. Investors interpreted Democratic nominee Kamala Harris’ stance on energy policy as favorable for renewable energy. Her support for reducing the U.S. dependence on foreign oil through diversified energy sources pushed solar stocks higher, with First Solar up over 4% and Enphase Energy rising more than 3%.

Bitcoin-Related Stocks Under Pressure

Bitcoin-related stocks, such as Coinbase and MicroStrategy, faced pressure in premarket trading as Bitcoin fell by less than 1% during the Asia trading session. The decline in cryptocurrency prices was tied to ongoing concerns about central bank policy, particularly in Japan, where the Bank of Japan indicated a willingness to raise rates if economic conditions align with their forecasts. This cautious stance on monetary policy caused crypto markets to react nervously, pushing stocks like Marathon Digital and Riot Platforms down by 3% and 1%, respectively.

GameStop Shares Drop After Disappointing Earnings

GameStop shares plummeted by over 10% in premarket trading after the company reported a significant drop in quarterly sales. The company posted revenues of $798 million for the second quarter, down from $1.16 billion a year earlier. The video game retailer also announced plans for a stock offering, which added further pressure on its stock. The combination of weak earnings and the stock offering spooked investors, leading to the sharp decline.

Market Forecast

Looking ahead, traders are eyeing the Federal Reserve’s next move, with most expecting a 25-basis-point rate cut. However, the slightly higher-than-expected core inflation data suggests caution. If the Fed sticks to a smaller rate cut, it may signal concerns about lingering inflationary pressures, which could keep both equities and Treasury yields volatile in the short term. Expect cautious trading as investors weigh the Fed’s actions against broader economic signals.

E-mini S&P 500 Index futures are lower, but well off its low of the session at 5468.50. This shift in momentum during the pre-market session could follow-through to the cash market opening, If that’s the case then the resistance cluster at 5532.00 to 5537.96 will come into play.

Look for sellers to re-emerge on the intial test of 5532.00 to 5537.96. However, be prepared for an upside breakout if buyers can take out the top of the zone.

On the downside, the inability to sustain the pre-market recovering could bring in new sellers with 5420.50 to 5395.00 the primary target zone.