Market Snapshot: U.S. stock futures steady as investors wait for the December inflation report

The Nasdaq Composite is up 4.4% already this year but remains down 31.9% from its record high.

What’s driving markets

Moves for stock index futures were minimal early Thursday, as traders eschewed fresh bold bets ahead of the crucial U.S. consumer price index report for December, due at 8:30 a.m. Eastern.

The S&P 500 has gained 3.4% already in 2023, partly on investor hopes that CPI inflation — which hit a four decade high of 9.1% in June and which by November had dropped to 7.1% — will continue to decline, allowing the Federal Reserve to trim interest rates later this year.

“Building optimism about the inflation outlook…[has driven] a significant rally in sovereign bonds, providing a less volatile rates environment and allowing risk to thrive,” said Stephen Innes, managing partner at SPI Asset Management.

Economists forecast that headline CPI will have shown a rise of 6.5% from a year ago and that core CPI, which strips out more volatile items like energy and food, will have climbed 5.7%, down from 6% in November. On a month-on-month basis headline CPI is expected to have dipped 0.1 and core to have risen 0.3%.

The report “could be a make-or-break moment for the market sentiment,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Overall, a data set in line with the soft expectations, or ideally softer, should further boost the Fed doves, increase the bets of a 25bp hike in February, pull the Treasury yields and the U.S. dollar further down and give a further boost to equities. If, however, the CPI print is higher than expected…then we could see a sharp repricing in favour of a 50bp at the next FOMC meeting,” she added.

Other U.S. economic data on the cards Thursday include the weekly initial jobless claims. There will also be a batch of Fed officials making comments, with Philadelphia Fed President Patrick Harker at 8:45 a.m., St. Louis Fed President James Bullard at 11:30 a.m., and Richmond Fed President Tom Barkin at 12:40 p.m. all speaking.

Though inflation is clearly the focus for Thursday, investors are also aware that the fourth-quarter corporate earnings season kicks into gear on Friday, with big banks, including JPMorgan Chase
JPM,
+0.74%,
Citigroup
C,
+1.08%
and Bank of America
BAC,
+0.76%
presenting their results.

Financial sector profits are expected to fall 6.3%, according to S&P Global Market Intelligence, with earnings for the whole S&P 500 forecast to contract 2.8%.