US pre-open: Stocks inch higher ahead of PPI data as bond yields retreat

(Sharecast News) - Stock futures were edging higher on Wednesday morning, though gains were limited as investors exercised caution ahead of key inflation figures and more Fedspeak over the coming days. Futures on the Dow and S&P 500 were ahead by 0.2% early on, while the Nasdaq was rising 0.3%.

The producer price index for September will be out at 0830 ET. Consensus estimates point to a slowdown in monthly price growth from 0.7% in August to 0.4% for September. The year-on-year rate is expected to remain unchanged at 1.6%.

Looking ahead, the release of the consumer price index will be closely watched on Thursday, and is expected to show that monthly inflation slowed to 0.3% from 0.6%, with the annual rate easing to 3.6% from 3.7%.

Expectations have risen in recent days that the Fed may hold rates steady at its next meeting after various remarks from policymakers regarding the impact that higher bond yields are having on their outlook. The S&P 500 alone has jumped 3% over the past three sessions.

Fed vice chair Philip Jefferson and Dallas Fed president Lorie Logan on Monday both highlighted how the recent spike in Treasury yields may potentially be doing enough of a job to keep financial conditions restrictive enough. While on Tuesday, Atlanta Fed President Raphael Bostic doubled down on the view, saying that the central bank is likely done tightening for now. Referring to bringing inflation down to the 2% target, Bostic said: "I actually don't think we need to increase rates anymore."

Speeches from several other Fed members were also scheduled for Wednesday's session too.

Nevertheless, bonds have rallied at the start of week on the back of rising conflict in the Middle East as the war between Hamas and Israel continues to ravage Gaza. The yield on a 10-year US Treasury note was down a further 10.6 basis points at 4.558% ahead of the Wall Street opening bell, continuing to retreat after hitting a high of 4.887% last week.

"The initial trigger for this reversal was the escalation of geopolitical tensions in the Middle East involving Hamas and Israel, which increased demand for safe-haven assets. However, investor risk sentiment improved as confidence grew that the conflict would likely remain contained and not disrupt financial markets significantly," said Stephen Innes, managing partner at SPI Asset Management.

"Notably, the recovery in risk sentiment hasn't translated into higher US yields, indicating a degree of acceptance of the Federal Reserve's less hawkish turn."

Minutes from the latest Federal Open Market Committee meeting will be out after the closing bell on Wednesday. "While a bit dated, the minutes may be helpful in getting some reasoning behind wanting to hold or hike. Still, it is likely to not be largely market moving given the Fed's dovish shift over the last few weeks," said analysts at TD Securities.

In company news, Exxon futures were lower on the news that it has sealed a $64.5bn deal to buy Pioneer Natural Resources, marking the biggest acquisition of a company this year.