Dow Jones, S&P 500, Nasdaq set to open higher as markets yearn for some CPI love for Valentine’s Day

6.30am: CPI release looming

Wall Street is expected to open higher ahead of a consumer inflation report that is likely to provide a steer for the Federal Reserve’s interest rate policy going forward. 

Futures for the Dow Jones Industrial Average (DJIA) rose 0.1% in Tuesday pre-market trading, while those for the broader S&P 500 index added 0.3%, and contracts for the Nasdaq-100 gained 0.4%.

January’s Consumer Price Index (CPI), scheduled for release at 8:30am Eastern Time, is expected to show core inflation decelerating to 5.4% from 5.7% in December, with the headline inflation slowing to 6.2% from 6.5% a month earlier.

On a monthly basis, core inflation is seen stable around 0.4%, while headline inflation is seen ticking higher from 0.1% to 0.5%. 

Ahead of today’s CPI release, the DJIA closed Monday up 1.1% at 34,256, the Nasdaq Composite added 1.5% to 11,892, and the S&P 500 jumped 1.1% to 4,137.

“A sufficiently soft, or ideally a softer-than-expected CPI read today should give an additional boost to the equity bulls and push the S&P500 to fresh highs in the actual positive trend,” commented Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “A stronger inflation read, on the other hand, could easily bring the Fed hawks back to the marketplace and send the S&P500 tumbling.” 

Following a “seismic” shift in market sentiment on the back of the surprisingly strong US labour reports for January, TickMill Group market analyst James Harte said today’s inflation reading couldn’t have more meaning attached to it.

“With the NFP coming in almost 300% above forecasts alongside the unemployment rate dropping to its lowest levels since 1969, traders are grappling with the prospect of a resurgence in Fed hawkishness,” Harte said. “The key takeaway from the report is that the US economy is holding up better than expected and therefore the Fed has more headroom to continue with rate hikes for longer or at higher levels.”

Meanwhile, as earnings season progresses, Coca-Cola, AirBnB, and Marriott are among the companies reporting fourth-quarter results today.