- US stock futures settled on Thursday after slumping in response to hot inflation data on Wednesday.
- Headline price growth rose to 3.5% in March, slashing the odds that Fed will cut interest rates soon.
- Wall Street is eager for rates to fall as that could lift stocks and boost economic growth.
Calm returned to Wall Street on Thursday as traders took a breather after Wednesday's inflation surprise.
S&P 500 and Dow Jones Industrial Average futures dipped 0.1% in premarket trading, while Nasdaq 100 futures were flat. The benchmark 10-year Treasury yield inched upward to 4.57%, while the US Dollar Index slipped to just over 105 points.
"Wall Street threw its toys out of the pram yesterday, with the S&P 500 down 1% and the small cap-focused Russell 2000 falling by 2.5% as risk appetite diminished," Russ Mould, AJ Bell's investment director, said in a morning note.
"Futures prices indicate that US markets won't have a second miserable session in a row when markets open for trading across the pond today, implying that we simply saw a knee-jerk reaction from investors and they've now had time to make more rational decisions."
Wednesday's sell-off was sparked by the release of Consumer Price Index data, which showed that annualized inflation accelerated to 3.5% in March. Investors wanted to see the pace of price growth fall toward the Federal Reserve's 2% target, paving the way for the central bank to start cutting interest rates.
Inflation spiked to a 40-year high of over 9% in the summer of 2022, spurring the Fed to raise its benchmark rate from virtually zero to over 5% within 18 months. The combination of soaring prices and much higher borrowing costs has squeezed households and businesses, heaped pressure on sectors like regional banking and commercial real estate, and raised the risk that the economy will slump into recession.
March's hot reading has slashed the chances of a rate cut in June that promised to boost risk assets like stocks and cryptocurrencies. Larry Summers, the former Treasury secretary, even told Bloomberg there was a 10% to 25% chance that the Fed might raise borrowing costs instead of lowering them.
CarMax and Constellation Brands are set to report earnings on Thursday. The economic calendar includes fresh jobless figures, producer price data, and scheduled comments from three Fed governors: Raphael Bostic of Atlanta, Austan Goolsbee of Chicago, and Susan Collins of Boston.