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Mixed Trading in U.S. Stock Index Futures

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Stock index futures in the U.S. exhibited a mixed performance early on Tuesday, buoyed by the decline in bond yields. Traders are eagerly awaiting the release of the June inflation report on Wednesday, which is the final significant data ahead of the Federal Reserve’s monetary policy decision later this month.

Performance of Stock-Index Futures

  • S&P 500 futures (ES00) rose by 2 points, or 0%, to 4446
  • Dow Jones Industrial Average futures (YM00) fell by 21 points, or 0.1%, to 34125
  • Nasdaq 100 futures (NQ00) added 14 points, or 0.1%, to 15201

On Monday, the Dow Jones Industrial Average (DJIA) surged by 210 points, or 0.62%, to reach 33944. Similarly, the S&P 500 (SPX) experienced an increase of 11 points, or 0.24%, closing at 4410. The Nasdaq Composite (COMP) also gained 25 points, or 0.18%, resting at 13685.

The three-day losing streak for the S&P 500 index was broken on Monday as benchmark bond yields retreated from their recent highs. On Tuesday morning, yields continued to ease, leading to stability in equity index futures.

“Markets began the week with a sense of caution, but a surge in rates in the U.S. emerged as the primary theme on Monday, causing the 10-year Treasury yield to drop below 4% once again,” explained Henry Allen, a strategist at Deutsche Bank.

The Decline in Yields and the Anticipated CPI Report

In recent days, yields have experienced a decline, primarily driven by new developments in the U.S. market. These developments include softer household inflation expectations and lower used car prices, which were unexpected. As a result, market experts are now eagerly awaiting the release of the U.S. consumer price index (CPI) report for June.

According to analysts, the upcoming CPI report is projected to reveal a drop in headline annual inflation to 3.1%. This significant decrease follows a multi-decade peak of 9.1% recorded just one year ago. However, it is worth noting that core inflation, which excludes volatile items such as energy and food prices, is expected to remain relatively high at 5%.

Despite these figures, some market participants are speculating that the Federal Reserve might choose to implement another interest rate hike later this year, in addition to the one expected to occur this month. The intention behind this move is for the Federal Reserve to maintain its efforts in achieving its 2% inflation target. Consequently, analysts argue that this presents an opportunity for equity bulls to experience a pleasant surprise in the market.

Richard Hunter, the head of markets at Interactive Investor, explains that if the upcoming CPI figures are weaker than forecasted, it could indicate a significant step towards the Federal Reserve’s inflation target. If this happens, there may be a brief rally in the market as the consensus shifts from two rate hikes this year to only one. This change in sentiment could potentially influence investors positively.

The anticipation surrounding the CPI report and its potential impact on the market highlights the importance of closely monitoring economic indicators and their implications for future market movements.

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