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U.S. stock index futures inched higher on Tuesday as markets await the release of key inflation data this week, which will signal the Federal Reserve’s future monetary policy.
Nasdaq futures (NDX:IND) +0.3%, S&P 500 futures (SPX) +0.2%, Dow futures (INDU) +0.1%.
Markets are pricing in a 25-basis point interest rate hike in May, according to Fed Funds futures, followed by a pause in the June meeting.
Investors are also eyeing bank quarterly results later this week, which will be the first earnings reports issued after the recent banking crisis.
“We believe recent stock market gains reflect expectations for the Fed to blink at the first signs of real weakness, inflation to remain meaningfully above target, and the economy to glide down for a soft landing,” said Chris Senyek, analyst, Wolfe Research. “Unfortunately, we don’t share the consensus enthusiasm. Rather, we believe the Fed is attempting to walk a fine line between bringing down inflation, not sparking a recession, and avoiding severe financial market stress.”
The 10-year Treasury yield (US10Y) dipped 2 basis points to 3.40%, while the 2-year yield (US2Y) was down 3 basis points at 3.97%.
“Absent some sort of massive uncontrolled bank failure in the next three weeks, the Fed will hike again, and if the inflation data is bad then they’ll hike more,” said SA contributor Logan Kane. “They’ve said this repeatedly, the market just doesn’t respect them, so they’ve piled into pivot bets over and over again since the start of 2022 despite worsening fundamentals.”
On the economic calendar, NFIB small business optimism shrank marginally in March.
Among active stocks, Hexo plunged after Tilray Brands (TLRY) confirmed its acquisition at a significant discount, while Tilray slipped after posting Q3 revenue miss.
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