Key Takeaways:
Wall Street's main indexes pointed to a lower open Tuesday as traders braced for the May Consumer Price Index report, the next major test of whether the Federal Reserve can hold rates steady through year-end.
Dow Jones Industrial Average futures declined 0.6%, or roughly 310 points, while S&P 500 futures fell 0.5% and Nasdaq 100 futures dropped 0.7% in pre-market trading. The moves extended a rotation out of technology stocks that began last week after Broadcom's AI-chip sales forecast disappointed, with chip names including Nvidia and Advanced Micro Devices sliding in early trading.
"The CPI print is the single most important data point between now and the Fed's June meeting," said Tom Essaye, founder of the Sevens Report. "A hot number would effectively lock in a hawkish hold and could force the market to start pricing in rate hike risk for later this year."
The yield on the benchmark 10-year U.S. Treasury note edged up to 4.49% in early trading, while the dollar held near recent highs. West Texas Intermediate crude rose 0.3% to around $87.70 a barrel as traders monitored U.S.-Iran negotiations and continued clashes between Hezbollah and Israel in southern Lebanon.
Friday's May jobs report showed nonfarm payrolls rose 172,000, more than double the 80,000 consensus estimate, while the unemployment rate held at 4.3%. The strong labor market data reinforced expectations that the Fed will keep rates unchanged at its June 17-18 meeting, with fed funds futures pricing a 96.4% probability of no change.
The CPI report, due at 8:30 a.m. Eastern, is expected to show headline inflation rising 0.3% month-over-month, according to economist estimates compiled by Bloomberg. Core CPI, which excludes food and energy, is forecast to rise 0.3% as well. A print at or above expectations would mark the fifth consecutive month of sticky inflation readings, complicating the Fed's path as it weighs whether elevated energy costs from Middle East tensions are feeding through to broader price pressures.
San Francisco Fed President Mary Daly said last week that monetary policy is "in a good place" but that there is "too much uncertainty" to provide guidance on the future path of rates. Kansas City Fed President Jeff Schmid said the central bank faces a choice between remaining patient or raising rates to tamp down inflation that has been above target for years.
In pre-market movers, Lululemon Athletica plunged 12% after cutting its full-year guidance, while DocuSign fell 4% after maintaining its recurring revenue forecast. Chipotle Mexican Grill rose 1% after JPMorgan upgraded the stock to Overweight.
This article is for informational purposes only and does not constitute investment advice.
