Five things you need to know before the market opens on Wednesday, July 12:
1. -- Stocks Edge Higher With Inflation Data On Deck
U.S. equity futures bumped higher Wednesday, while the dollar slipped lower against its global peers and Treasury bond yields steadied, as investors braced for what could be one of the more significant inflation readings of the year prior to the opening bell.
Stocks are poised for a breakout, booking two sessions of modest gains for the S&P 500, heading into the data release at 8:30 am Eastern time, as investors look for the slowest reading for headline inflation in more than two years and a possible dip below the 5% mark for core consumer prices.
Both moves would challenge the Federal Reserve's standing forecast of "two or more" rate hikes between now and the end of the year as the broader economy slows from the impact of 500 basis points of previous rate hikes.
Interest rate traders are fully pricing in the chance of a July rate hike. The CME Group's FedWatch indicates a 92.4% chance of a quarter-point increase later this month, a move that would take the benchmark federal-funds rate to between 5.25% and 5.5%.
A follow-on hike, however, remains up for debate, with the odds pegged at only 22.2% for the September meeting and around 40% for November.
"If the market gets a positive surprise with inflation coming in lower than expected, then it could fuel the positive sentiment in equities even further," Saxo Bank strategists wrote Wednesday.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, hit a fresh two-month low of 101.34 in overnight trading, as was last seen 0.23% lower on the session at 101.496, heading into the CPI release.
Benchmark 2-year Treasury note yields, the most sensitive to interest rate changes, were holding at 4.864% while 10-year paper was pegged at 3.948%.
Once the inflation data is cleared later in the session, stocks are then likely to quickly shift focus to the start of the second quarter earnings season, with updates from PepsiCo PEP on Thursday and a host of banks on Friday, including JPMorgan (JPM) -) and Wells Fargo (WFC) -).
Collective S&P 500 profits are expected to fall 6.4% from a year earlier to a share-weighted $436.9 billion, according to data from Refinitiv, with the energy sector leading the benchmark's overall earnings decline.
Revenues are likely to fall 0.8% from last year, suggesting that much of the profit decline will be linked to higher input costs and narrowing margins, particularly given the overall resilience of the U.S. labor market and the strength of the dollar on foreign exchange markets.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 were indicating an 8 point opening bell gain while those linked to the Dow Jones Industrial Average were priced for a 45 point move to the upside. Nasdaq futures were up 32 points.
In overnight trading, the MSCI ex-Japan index rose 0.7% into the close of trading, while Japan's Nikkei 225 fell 0.81% as the yen gathered pace against the slumping greenback.
The Europe-wide Stoxx 600 was marked 0.84% higher in early Frankfurt trading while Britain's FTSE 100 gained 1.1% in London, with banks pacing gains following a successful series of stress tests performed by the Bank of England on the country's largest lenders.
2. -- Fed Rate Path In Focus As June CPI Seen Easing Sharply
The Commerce Department will publish what could be a crucial June inflation report prior to the start of trading Wednesday as investors look to an extended stretch of easing consumer price pressures that could alter the Fed's current rate path.
Wall Street forecasts suggest headline consumer prices rose 3.1% over the month of June -- the lowest since December of 2021 -- compared with the four-decade high of 9.1% recorded over the same period a year earlier and the 4% pace reported in May.
On a monthly basis, Wall Street forecasts pegged the headline CPI at 0.3%, a nudge faster than the 0.1% pace tallied in May, thanks in part to higher gas prices. The core CPI is seen easing to 0.3% from 0.4%.
"Too many Fed officials have made it clear that they think further hikes are needed," said Ian Shepherdson of Pantheon Macroeconomics. "The real value of a decent June CPI report, then, is that it would increase market doubts about the prospects of a further rate hike in September."
3. -- United Airlines CEO Meets With FAA Head Amid Air Traffic Control Criticism
United Airlines (UAL) -) CEO Scott Kirby met with acting Federal Aviation Administration head Polly Trottenberg late Tuesday amid increasing criticism of the regulator's handing of the nation's air traffic control system.
Kirby, who himself faced public and shareholder pressure for taking a private jet during a severe weather delay that left thousands of United customers stranded in late June, has been critical of the FAA and its staff shortages, telling United employees last month that "over 150,000 customers on United alone were impacted" by disruptions in late June.
The Transportation Department Office of Inspector General said in a report last month that the FAA has made "limited efforts to ensure adequate controller staffing" at key facilities, adding that this "poses a risk to the continuity of air traffic operations.”
United Airline shares were marked 0.14% lower in pre-market trading to indicate an opening bell price of $56.10 each.
4. -- Disney Shares Edge Higher On Reports of India Business Sale
Walt Disney (DIS) -) shares nudged higher in pre-market trading following reports that suggested the group is planning to exit its money-losing media business in India.
The Wall Street Journal first reported that Disney had reached out to bankers seeking a joint venture or a sale of its Star India division, which is purchased along with a host of other assets as part of its $71.3 billion deal with Fox in 2019.
Reuters reported that Disney+ Hotstar, the streaming unit of Star India, could be worth between $15 billion and $16 billion, although it has been shedding subscribers since losing the rights to cricket broadcasts and increasing pressure from rivals such as JioCinema, which is backed by Reliance Industries and Asia's richest man, Mukesh Ambani.
Disney shares were marked 0.18% higher in pre-market trading to indicate an opening bell price of $89.65 each.
5. -- Nvidia Courted As 'Anchor Investor' For Arm's New York IPO
Nvidia (NVDA) -) shares edged higher in pre-market trading following a report suggesting the chipmaker will be brought in as a so-called 'anchor investor' in the planned New York listing of U.K.-based Arm.
Arm, which is being spun-off by SoftBank as the tech investment fund seeks to raise cash after absorbing billions in losses, snubbed the London Stock Exchange in favor of a listing on the Nasdaq later this year. Nvidia attempted to by Arm for $66 billion, but the deal was blocked by regulators in 2022.
London's Financial Times said Nvidia is being asked to take a long-term stake in Arm, alongside U.S. rival Intel INTC, that could be valued in the region of $35 billion to $40 billion.
Nvidia shares were marked 0.48% higher in pre-market trading to indicate an opening bell price of $426.10 each.
