US stock futures rose on Tuesday as investors braced for a much-anticipated inflation reading.
Futures linked to the S&P 500, the Dow Jones Industrial Average and the big tech Nasdaq Composite each gained about 0.4% in premarket trading.
The Bureau of Labor Statistics is plans to publish its consumer price index (CPI) for August at 8:30 a.m. Eastern time. The data is expected to show inflation rose at an 8.1% annual pace last month, according to consensus estimates compiled by Bloomberg. If materialized, the reading would mark the second consecutive moderation in prices since four-decade highs reached earlier this year.
Tuesday’s print is likely to be a defining moment for the recent rally in stock markets. On Monday, the S&P 500’s 1% gain across 11 sectors helped the index post its biggest four-day gain since June, according to Bloomberg data.
The latest indicator on how fast inflation is rising in the US economy comes a week before Federal Reserve officials meet for their next meeting on September 20-21. Market participants largely anticipate that policymakers will deliver a third consecutive 75 basis point interest rate hike after weeks of aggressive messages of the members of the US central bank.
“The more dovish-than-expected inflation readings last month may have fueled hopes that the Fed will raise rates less aggressively, but Powell has made it clear the bank won’t stop until the job is done,” Chris Larkin, managing director of operations at Morgan. Stanley’s E*TRADE said in a note.
“And with market expectations for a less aggressive Federal Reserve subdued, investors can focus on other challenges facing the market, such as unrealistically high earnings estimates and headwinds posed by an extremely strong US dollar.”
platoon (PTON) was in the spotlight early Tuesday following an announcement Monday afternoon that co-founder John Foley retires of the board of directors, months after Peloton hired former Spotify executive Barry McCarthy as CEO. Shares fell about 2% before the open.
On the other hand, shares of Rent the Runway (RENT) tanked nearly 25% in premarket trading on Tuesday after the company cut its orientation for the whole year and unveiled plans to cut 24% of its corporate workforce, citing “potentially tougher macro conditions.”
“Once we get past this week’s CPI and PPI inflation reports and next week’s FOMC meeting, the next major market catalyst will be third-quarter earnings,” DataTrek’s Nicholas Colas said in a note.
According to data from FactSet Research, S&P 500 earnings growth expectations stand at a 3.7% rise for the third quarter, well below expectations for growth of 9.8% at the end of June.
Colas notes that analysts have slashed Q3 earnings expectations in the last 2-3 months for every sector in the index except energy, with seven of the 11 groups now expected to show a full decline in earnings. year over year, compared to just three in the second quarter.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc