Stock index futures tick up after post CP rally

[Wall Street-Street Sign]
P_Wei/E+ via Getty Images

Stock index futures rose on Wednesday, a day after the S&P 500 and Nasdaq notched record closes as rate cut bets dominated headlines again.

S&P 500 futures (SPX [https://seekingalpha.com/symbol/SPX]) +0.2%, Nasdaq 100 futures (US100:IND [https://seekingalpha.com/symbol/US100:IND]) +0.3%, and Dow futures (INDU [https://seekingalpha.com/symbol/INDU]) +0.3%.

The 10-year Treasury yield (US10Y [https://seekingalpha.com/symbol/US10Y]) fell 2 basis points to 4.36%. The 2-year yield (US2Y [https://seekingalpha.com/symbol/US2Y]) fell 1 basis point to 3.72%.

U.S. stocks closed at all-time highs on Tuesday after the July retail inflation report came largely in line, while core CPI was slightly hot on a yearly basis, fueling Federal Reserve rate cut odds to increase to more than 90%.

"Ironically, given the market rally, 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," Deutsche Bank's Henry Allen said.

But even as core CPI was accelerating, markets were reassured because the tariff impact on inflation didn’t look so obvious this time, Allen added.

"Yesterday’s July consumer price inflation data showed trade taxes seeping into prices. US appliance prices are higher than in March—in most other major economies, they are lower. Tire prices leapt in July," UBS' Paul Donovan said.

Assuming the data is honestly published, consumer price inflation should reflect a crescendo of trade tax effects over the coming months, with the full impact visible next year, Donovan added.

Investors are now pricing a 96.2% chance of a rate cut at the September meeting.

The economic calendar is relatively quiet on Wednesday. There are a few Fed speakers lined up for the day, including Chicago Fed President Austan Goolsbee and Atlanta Fed President Raphael Bostic.

The July wholesale inflation will land on Thursday before the market opens.

MORE ON MARKETS

* Tariffs Causing Inflation? Not So Fast! [https://seekingalpha.com/article/4812676-tariffs-causing-inflation-not-so-fast]
* July CPI: Fuel And Housing Steal The Show [https://seekingalpha.com/article/4812642-july-cpi-fuel-and-housing-steal-the-show]
* July CPI: Inflation Persists, But Path To September Cut Stays Clear [https://seekingalpha.com/article/4812620-july-cpi-inflation-persists-but-path-to-september-cut-stays-clear]
* BTIG’s Krinsky says S&P 500 might slip toward 6,100 on seasonal weakness [https://seekingalpha.com/news/4476936-btigs-krinsky-says-sp-500-might-slip-toward-6100-on-seasonal-weakness]