U.S. stock futures tread water as investors await inflation data for May

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MARKET SNAPSHOT

© Alain Jocard/Agence France-Presse/Getty Images Inflation in focus.

U.S. stock-index futures were mixed Thursday as investors eagerly awaited a read on May inflation.

What are major benchmarks doing?

  • Futures on the Dow Jones Industrial Average rose 75 points, or 0.2%, to 34,512.
  • S&P 500 futures were up 2.65 points, or less than 0.1%, at 4,221.25.
  • Nasdaq-100 futures fell 34.50 points, or 0.3%, to 13,779.75.

On Wednesday, stocks ended slightly lower, with the Dow falling 152.68 points, or 0.4%, to close at 34,447.14. The S&P 500 gave up a modest early gain that pushed the large-cap benchmark slightly above its previous record close of 4,232.60 set on May 7 to finish the day down 0.2%. The Nasdaq Composite closed 0.1% lower.

What’s driving the market?

Stocks have remained in a holding pattern this week as investors awaited the U.S. May consumer-price index reading due at 8:30 a.m. Eastern. Economists expect CPI to show a 0.5% monthly rise for May. That would put the year-over-year rate at 4.8% or a bit higher, the fastest pace since 2008 when oil peaked at $150 a barrel.

Read: Inflation is still surging, CPI will likely show. Any relief for consumers in sight?

“Unless inflation comes in well ahead of expectations, the Fed’s stance will not change materially,” said Fawad Razaqzada, market analyst at ThinkMarkets. A rise in line with forecasts could see equities continue to drift higher until next week’s Fed policy meeting.

“But if we see a bigger reading — like 5% or more — then inflation concerns could come back to haunt investors as this could raise speculation that price pressures are not going to be transitory,” Razaqzada wrote. “So, a lot depends on the outcome of the inflation report.”

A hotter-than-expected jump in the April CPI briefly rattled markets last month, sparking concerns over the potential for runaway inflation and the possibility the Federal Reserve could move sooner than anticipated to slow its bond purchases.

But such inflation-related worries appear to have faded, with Treasury yields sinking. The yield on the 10-year Treasury note on Wednesday fell below the 1.50% threshold for the first time since early May.

“Investors appear to be backing away from the reflation trade precisely at the moment of greatest risk that the realized data catches up with expectations,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, in a note.

The European Central Bank will deliver a statement at the end of its policy meeting at 1:45 p.m. Frankfurt time, or 7:45 a.m. ET, followed by ECB President Christine Lagarde’s news conference at 8:30 a.m.

The ECB is largely expected to maintain the accelerated pace of its bond purchases, while upgrading its outlook for the eurozone economy. Some analysts, however, see scope for policy makers to slow bond purchases under its pandemic emergency purchase program, or PEPP.

See: The ECB decision is coming. Here’s what analysts expect.

Meme stocks were also in focus after GameStop Corp. late Wednesday disclosed that the Securities and Exchange Commission had asked for its cooperation with an investigation into the unprecedented volatility its stock has seen in recent months. It also suggested it isn’t the only one being probed.

Weekly U.S. data on jobless claims are also set for release at 8:30 a.m. Economists expect it to show first-time applications for benefits fell to 370,000 in the week ended June 5, down from 380,000 the previous week.

May U.S. federal budget figures are due at 2 p.m. Eastern.

Which companies are in focus?

  • GameStop late Wednesday appointed two Amazon.com Inc. officials as its new top executives, shortly after private-equity investor Ryan Cohen was voted the company’s chairman of the board. The company also disclosed plans to sell more shares. The popular meme stock was down more than 5% in premarket trade.
  • Other meme stocks were under pressure in premarket action after GameStop’s disclosure of the SEC probe, with AMC Entertainment Holdings Inc. down 3.1%; BlackBerry Ltd. down 1.7%; Koss Corp. down 1.2%; and Nokia Corp. off 1.1%.
  • Shares of RH were up more than 6% after the retailer formerly known as Restoration Hardware topped earnings expectations again at the beginning of 2021, and lifted its forecast for the year.
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