US stock index futures steady with CPI data in sight

Investing.com-- U.S. stock index futures were flat in evening deals on Tuesday as investors hunkered down ahead of key consumer inflation data that is likely to factor into the outlook for interest rate cuts.

A softer-than-expected producer inflation reading sparked a rally on Wall Street, helping U.S. benchmarks reach levels seen before a severe rout last week. The prospect of softer inflation attracting deeper rate cuts was a major driver of stock gains.

S&P 500 Futures fell slightly to 5,45.25 points, while Nasdaq 100 Futures steadied at 19,107.75 points by 19:11 ET (23:11 GMT). Dow Jones Futures fell 0.1% to 39,869.0 points. 

CPI data awaited for more rate cut cues 

Focus was squarely on consumer price index inflation data, due on Wednesday.

The reading is expected to show inflation eased slightly in July, which, coupled with a soft producer price index print on Tuesday, is likely to set the stage for a deeper interest rate cut by the Federal Reserve in September. 

Traders are split over a 25 and 50 basis point cut in September, CME Fedwatch showed. But bets on a 50 bps cut slightly increased, standing at a 53% chance, after Tuesday’s PPI reading. 

The prospect of lower interest rates bodes well for stock markets, given that it frees up capital that can then be invested into the sector. Lower rates also help soothe concerns over slowing economic growth, after weak readings on the labor market sparked increased volatility on Wall Street. 

Wall St at 2-week highs on rate cut hopes 

Wall Street indexes surged on Tuesday, extending a rebound from last week’s volatility and coming close to two-week highs. 

The S&P 500 rose 1.7% to 5,434.43 points, while  the NASDAQ Composite rose 2.4% to 17,183.95 points on Tuesday. The Dow Jones Industrial Average rose 1% to 39,765.64 points.

Traders piled into discounted technology stocks, especially heavyweight internet and chipmaking firms, after some mixed earnings over the past three weeks sparked deep losses in the sector.

The prospect of lower rates also sparked buying into more economically sensitive sectors.