US stock futures rose Tuesday as investors prepared for a much-anticipated inflation reading.
Futures pegged to the S&P 500 and tech-heavy Nasdaq Composite each gained about 0.7% in pre-market trading. Dow futures were up 200 points, or about 0.6%.
The Bureau of Labor Statistics is scheduled to release its August Consumer Price Index (CPI) at 8:30 am ET. Data shows that inflation rose 8.1% year-on-year last month, according to consensus estimates prepared by Bloomberg. If realized, the reading would mark the second consecutive moderation in prices from the four-decade highs reached earlier this year.
Tuesday’s printout will likely be a make-or-break moment for the recent stock market recovery. On Monday, the S&P 500’s 1% gain in all 11 sectors helped the index, according to data from Bloomberg, make the largest four-day advance since June.
The final gauge of how quickly inflation is rising in the US economy comes a week before Federal Reserve officials meet for their next meeting on September 20-21. Market participants largely expect policymakers to implement a third consecutive 75 basis point rate hike after weeks of aggressive messages from members of the US central bank.
“Last month’s milder-than-expected inflation data has fueled hopes that the Fed would raise rates less aggressively, but Powell has been clear that the bank won’t stop until the job is done,” said Chris Larkin, Morgan trade director. Stanley’s E*TRADE said in a note.
“And now that market expectations of a less aggressive Fed are subdued, investors can focus on other challenges facing the market, such as unrealistically high earnings estimates and headwinds from an extremely strong US dollar.”
Peloton (PTON) was in the spotlight early on Tuesday after announcing Monday afternoon that co-founder John Foley is stepping down from its board of directors, months after Peloton hired former Spotify exec Barry McCarthy as CEO. The stock fell about 2% before the opening.
Elsewhere, Rent the Runway (RENT) shares fell nearly 25% in pre-market trading Tuesday after the company lowered its full-year outlook and revealed plans to cut 24% of its corporate workforce, citing ” potentially harsher macro conditions”.
“Once we get past this week’s CPI and PPI inflation reports and next week’s FOMC meeting, the next major market catalyst will be Q3 earnings,” DataTrek’s Nicholas Colas said in a note.
According to data from FactSet Research, earnings growth expectations for the S&P 500 are up 3.7% for the third quarter, down sharply from the 9.8% growth forecast at the end of June.
Colas points out that for the past 2-3 months, analysts have lowered third-quarter earnings expectations for every sector in the index except energy, and that seven out of 11 groups now expect a marked year-over-year decline in earnings. will show, compared to just three in the second quarter.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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