U.S. stock index futures were subdued on Tuesday as investors refrained from placing large bets ahead of commentary from Federal Reserve Chair Jerome Powell after two other policymakers fanned concerns about the rate hike trajectory.
Powell is set to speak at a panel discussion at 9 am ET. His speech could provide clarity on the outlook for interest rates.
Wall Street’s main indexes gave up early gains on Monday after two Fed policymakers said the upcoming inflation data will help them decide if they could slow the pace of interest rate hikes to a quarter-point increase at an upcoming meeting in February.
The highly awaited U.S. Labor Department’s inflation report on Thursday is expected to show some moderation in year-on-year consumer prices in December.
That could add to recent evidence of slowing inflationary pressures after data last week showed a moderation in wage growth and boosted hopes that the Fed could take a less aggressive stance on its monetary policy tightening and cool demand without tipping the economy into a severe recession.
“Fresh worries have emerged about higher borrowing costs lingering for longer in the U.S.,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“It is clear the Fed will stay on high alert to any evidence that inflation is proving sticky and will be hesitant to press pause until significant progress is made in reducing the price spiral. That’s adding to concerns that the U.S. economy may not escape with a soft landing.”
Money market bets pointed to a 77% chance of a 25-bps hike to 4.50%-4.75% in the Fed’s upcoming policy meeting, with the terminal rate seen slightly below 5% by June.
This is in contrast to the 5%-5.25% peak policy rate expected by San Francisco Fed President Mary Daly and Atlanta President Raphael Bostic.
Along with economic data and comments from Fed officials, investors are also awaiting corporate earnings reports, with big U.S. banks expected to report lower fourth-quarter profits this week.
At 6:12 a.m. ET, Dow e-minis were down 101 points, or 0.3%, S&P 500 e-minis were down 6.5 points, or 0.17%, and Nasdaq 100 e-minis were down 4.75 points, or 0.04%.
Bed Bath & Beyond Inc (BBBY.O) was up 4.9% in premarket trading, ahead of its quarterly earnings report due later in the day.
