U.S. stock futures traded cautiously after a strong rally, with gains cooling as investors awaited key inflation data, while geopolitical tensions and rising energy prices continued to shape near-term market sentiment.
U.S. stock futures turned cautious after a seven-session rally, edging only slightly higher as traders awaited the first inflation reading expected to fully reflect the impact of the war. Futures linked to the S&P 500 and the Nasdaq-100 had posted gains for seven consecutive sessions heading into Friday, but momentum appeared to be moderating ahead of the key data release.
The ES and NQ contracts were up 0.06% and 0.13%, respectively, in the early New York session, while the YM contract tied to the blue-chip Dow Jones Industrial Average edged down 0.04%.
Inching toward Peak: The ES contract had hit a record intraday high of 7,043 on Jan. 29, and its closing peak of 7,016.50 was scaled on Jan. 12. The futures contract now trades 2.6% off its record high.
ES Futures YTD Chart
Source: TradingView
Catalysts Watch: The broader equity market’s near-term trajectory depends on the March consumer price inflation (CPI) report due shortly after the market opens. Economists, on average, expect an acceleration in the monthly rate of the headline CPI to 1% from 0.3% and the annual rate to 3.4% from 2.4%.
The core CPI index is expected to tick up to 0.3% month over month (MoM), up from the 0.2% pace in February, and the annual increase is estimated at 2.7% compared with 2.5% last month.
The spike expected in the headline numbers is an offshoot of the geopolitical developments in the Middle East. Since the start of the conflict between the U.S. and Iran on Feb. 28, energy commodity prices have jumped. The average retail gasoline price in the U.S. has topped $4 a gallon for the first time since 2022.
Even with a two-week ceasefire in place since midweek, an uneasy calm persists, as Iran accuses the U.S. of breaching certain terms of the agreement. Meanwhile, the Strait of Hormuz remains largely restricted, with shipping traffic still heavily constrained, keeping supplies tight.
After the CPI report, the University of Michigan is due to release its preliminary consumer sentiment report for April, which also includes inflation expectations readings.
Traders also look forward to the first-quarter reporting season with optimism that healthy corporate profit growth would continue to support the market. FactSet estimates 13.2% year over year growth in the cumulative earnings of S&P 500 companies, which would mark the sixth straight quarter of double-digit earnings growth.
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