Futures stall ahead of key inflation report

(Reuters) – S&P 500 futures paused on Wednesday after the benchmark index posted four straight days of gains, as investors cautiously awaited a key inflation report for clues on the pace of interest rate cuts by the Federal Reserve.

Nasdaq 100 futures fell 0.1%, with Alphabet down 1.3% in premarket trading. The U.S. Justice Department is reportedly considering options such as breaking up Google, according to a news report.

A rebound in technology and mega-cap stocks helped markets recoup most of their losses from a rout in global markets earlier this month, partly driven by data showing the U.S. unemployment rate rose in July.

Market attention now turns to the July U.S. Consumer Price Index (CPI) reading, due at 8:30 a.m. ET, which is expected to show that headline inflation rose 3% year-on-year, the same as in June.

The data follows weaker-than-expected producer price data released Tuesday, which indicated that inflation continues to moderate, although it has yet to reach the U.S. central bank’s 2% target.

Atlanta Federal Reserve President Raphael Bostic said he wanted to see “a little bit more data” before he was ready to support an interest rate cut.

“It is notable that inflation was below consensus expectations from April to June, with prices and wages lower than economists had anticipated,” said Stefan Koopman, senior macroeconomic strategist at Rabobank.

“We expect the Fed to cut rates in September, primarily because of rising unemployment and as a precaution against a possible recession.”

Traders broadly expect the Fed to begin its monetary policy easing cycle at its September 17-18 meeting, but are almost evenly split on whether it will be a 25 basis point rate cut or a larger 50 basis point cut.

At 5:18 a.m., the Dow E-minis were up 50 points, or 0.13%, and the S&P 500 E-minis were virtually unchanged at 5,459.25.

The Cboe Volatility Index, Wall Street’s gauge of fear, remained below its long-term average of 20 points for a second day at 18.37 after hitting its highest level since 2020 last week.

Among other stocks, Kellanova jumped 7% in premarket trading after a source told Reuters that confectionery giant Mars was close to a deal to acquire the maker of snacks such as Cheez-It and Pringles for nearly $30 billion.

(Reporting by Medha Singh in Bangalore; Editing by Maju Samuel)