- US futures were mostly negative Thursday ahead of January consumer inflation data.
- A strong reading could force the Federal Reserve to consider raising interest rates more quickly.
- The dollar remained steady and gold edged lower.
US futures traded mostly lower on Thursday, ahead of key data on consumer inflation that could cement investor expectations for the likely near-term path of interest rates.
Futures on the S&P 500 and Nasdaq 100 were down 0.21% and 0.38% while those on the Dow Jones were up just 0.1 %, as all eyes were on January's consumer price index, due out later in the day.
The CPI reading – due at 8:30 a.m. ET – may be key in determining how aggressively the Federal Reserve raises interest rates to tame inflation.
"The Kryptonite for markets is undoubtedly inflation at the moment and it's that time again with US CPI today the main event of the week," Deutsche Bank strategists said in a note.
Deutsche Bank expects headline CPI to have risen by 7.2% in January, marking another four-decade high, while the core rate, which excludes food and energy prices, is expected to have risen by 5.8%. This could fuel expectations for a 50 basis point rate hike by the Fed by March, analysts said.
Fed Chair Jerome Powell did not rule out a 50bps rate hike nor did he clarify how many times interest rates would be increased.
"The strength of last week's payrolls numbers has certainly shifted thinking towards the possibility of a 50-basis point rate move by the Fed in March, with a strong CPI number today only serving to reinforce that narrative," CMC Markets chief strategist Michael Hewson said.
A milder reading could trigger more volatility if it prompts investors to adjust their outlook for Fed monetary policy. Optimism about the US economy has remained strong with a better-than-expected jobs report last week, but the Omicron variant of Covid-19 has caused some worries.
"If we don't start gliding lower in line with expectations soon, the market is going to be pricing some 50bps Fed hikes into the equation for 2022. Today's number is a complicated one as Omicron could create distortions that unwind next month," Deutsche Bank strategists said in a daily note.
Meanwhile, stock markets in Europe were little changed, with the Stoxx 600 down 0.1%, while London's FTSE 100 and Frankfurt's DAX were both up 0.1%.
The dollar was steady against a basket of major currencies, while gold eased 0.2% to $1,833 an ounce. US 10-year Treasury yields held around 1.937%.
WTI crude futures rose 0.1% to $89.77 a barrel, while Brent crude futures eased 0.1% to around $91.42 a barrel.