U.S. stock futures were edging up early Wednesday after indexes reached new highs on the back of encouraging inflation data, firming up bets on a September rate cut from the Federal Reserve.
Dow Jones Industrial Average futures were up seven points, or broadly flat. S&P 500 futures were up less than 0.1% and Nasdaq 100 futures were rising 0.1%.
The S&P 500 and Nasdaq Composite indexes hit record highs on Tuesday following consumer price index data showing core prices rising 3.1% over the past 12 months but lower-than-feared goods inflation, suggesting a limited inflationary effect from tariffs.
“There were some concerning signs in the release, including the fastest core CPI reading in six months. But for investors, the fear was that an even hotter number would remove the prospect of a September rate cut altogether, particularly if the tariff impact became more obvious,” wrote Deutsche Bank analyst Henry Allen in a research note.
The market-derived probability of the Fed reducing rates in September now stands at 94% according to the CME FedWatch tool, up from 86% the previous day.
The stocks of companies particularly exposed to borrowing costs will be in focus, with banks and airlines among the major beneficiaries on Tuesday. The Dow is 1.2% off a record high set in December. The yield on the 10-year benchmark Treasury note stood at 4.274% early on Wednesday broadly flat from the previous day.
“Stocks are seeing another boost higher as tariff fears are less than expected, earnings are strong, and prospects for a fall Federal Reserve rate cut are rising. While we believe it still makes sense to stay invested, much of this year’s stock gains are likely already in, and we would not be surprised to see stocks trade in a sideways pattern for the coming months,” said Rich Mullen, CEO of Pallas Capital Advisors.