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U.S. stock futures recover after early dip on inflation fears

U.S. stock futures slipped back early Tuesday as further signs of stubborn inflation forced up bond yields, only to recover ground as Wall Street’s opening bell approached.How are stock-index futures trading S&P 500 futures ES00, +0.24% rose 9 points, or 0.2%, to 3997 Dow Jones Industrial Average futures YM00, +0.22% added 69 points, or 0.2%

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U.S. stock futures slipped back early Tuesday as further signs of stubborn inflation forced up bond yields, only to recover ground as Wall Street’s opening bell approached.

How are stock-index futures trading
  • S&P 500 futures ES00, +0.24% rose 9 points, or 0.2%, to 3997
  • Dow Jones Industrial Average futures YM00, +0.22% added 69 points, or 0.2%, to 32978
  • Nasdaq 100 futures NQ00, +0.27% climbed 38 points, or 0.2%, to 12121

On Monday, the Dow Jones Industrial Average DJIA, +0.22% rose 72 points, or 0.22%, to 32889, the S&P 500 SPX, +0.31% increased 12 points, or 0.31%, to 3982, and the Nasdaq Composite COMP, +0.63% gained 72 points, or 0.63%, to 11467.

The Nasdaq Composite is down 1% so far in February but remains up 9.6% for the year to date.

What’s driving markets

More evidence that high inflation is proving sticky in developed economies was forcing bond yields higher and pressuring stocks in early action – though equity futures recovered as the day progressed.

Data from France and Spain on Tuesday showed consumer price increases accelerating this month, raising the prospects that the main eurozone inflation numbers for February, due Thursday, will come in hotter than forecast.

Furthermore, U.K. grocery inflation hit 17.1% in the four weeks to mid February, another record high, Reuters reported.

This follows last Friday’s U.S. PCE reading, which also pointed to inflation proving more stubborn than hoped.

Together they raise the chances that the eurozone, U.K. and U.S. central banks may need to raise interest rates by more than expected. Some benchmark German and U.S. government bond yields rose to fresh multi-year highs in response.

This increase in implied borrowing cost was in turn hitting equity futures. The S&P 500 was already in line to end February with a 2.3% loss amid heightened concerns about tighter monetary policy from the Federal reserve.

However, as the premarket session progressed in New York, futures rallied into the black, helped by a well-received earnings report from retailer Target TGT, -0.09%.

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“[S]entiment has buckled sharply in the last two weeks, with most investors firmly in the hawkish Fed camp, expecting higher rates for longer,” said Mark Newton, head of technical strategy at Fundstrat in a note to clients.

“[The S&P 500] looks to be in ‘No-Man’s Land’ currently and requires either a rally back over 4060 to set its course for higher prices to 4325. Conversely, a breach of 3900 would argue for a retest of December 2022 lows,” he added.

U.S. economic updates set for release on Tuesday include the trade balance in goods, retail inventories and wholesale inventories, all for January and all due at 8:30 a.m. Eastern. The Case Shiller home price index for January will be published at 9 a.m. followed at 10 a.m. by the February consumer confidence report.

Chicago Fed President Austan Goolsbee is due to speak at 2:30 p.m.

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