U.S. stock futures gained Wednesday morning, as investors looked ahead to a key report on the state of inflation in the U.S. to help clarify the path forward for monetary policy.
Contracts on the S&P 500 and Nasdaq each added more than 1%, with both indexes looking to recoup losses from the past week. Dow futures gained more than 250 points, or 0.9%. Treasury yields declined, and the benchmark 10-year yield dropped more than 6 basis points to dip well below 3%.
A key datapoint due for release Wednesday morning will be the Labor Department’s April Consumer Price Index (CPI), offering an update on price increases across the U.S. economy. Economists expect the report will show some deceleration in inflation rates and confirm that March was the peak for price gains this year.
However, consensus economists are still looking for an 8.1% year-over-year rise in headline inflation, which would still be close to March’s more than 40-year high of 8.5%. And much of that deceleration will likely come as a result of a moderation in the typically volatile energy category, as energy prices have eased somewhat after spiking immediately following Russia’s invasion of Ukraine in late February.
The latest inflation data will help to inform how far the Federal Reserve will have to go on raising interest rates and tightening monetary policies in order to rein in rising prices. Uncertainty about the Fed’s next moves — and about whether these moves will bring down inflation while avoiding triggering a recession — has stirred up heightened volatility across risk assets, bringing the S&P 500 down by nearly 17% from its recent record high from Jan. 3. Stocks briefly turned lower Tuesday afternoon after Cleveland Fed President Loretta Mester said she saw the case for raising interest rates by 50 basis points at the next two Fed meetings, while leaving the door open to a potentially even larger 75 basis point rate hike.
“We’re going to see more volatility. This is not going to be an easy path forward as we still have a lot of unknowns,” Omar Aguilar, Schwab asset management CEO and chief investment officer, told Yahoo Finance Live on Tuesday. “There’s still a lot of uncertainty in many parts, not just in the macroeconomic and the economic structure, but also just geopolitically, things that haven’t been resolved, like the war in Ukraine as well as just the COVID situation in China.”
Others also suggested investors should brace for more near-term volatility.
“We finally started to see some signs of panic in the past week or so, obviously late last week and Monday,” Scott Brown, LPL Financial technical market strategist, told Yahoo Finance Live on Tuesday. “But we’re a little bit skeptical that we’re actually at the bottom. It doesn’t mean we have to go down a lot further. But a lot of things we look at, whether it’s put-to-call ratios really being extreme, the VIX spiking above 40 … They aren’t really as extreme as we typically would see in a correction, bottom, of this magnitude.”
7:45 a.m. ET: Mortgage applications rise for a back-to-back week despite increasing rates
U.S. mortgage application volume rose last week for a second consecutive week, even as mortgage rates rose to their highest levels in over a decade.
The Mortgage Bankers Association’s weekly mortgage applications index registered a 2.0% rise during the week ended May 6, according to the firm’s latest weekly report Wednesday morning. Purchase applications led the way higher, with these climbing by 5% week-on-week on a seasonally adjusted basis. Still, on a seasonally unadjusted basis, applications for purchases were 8% lower compared to the same week last year. And applications for refinances fell by 2% compared to the previous week and by 72% compared to the same week last year.
“The increase in mortgage applications last week was driven by a strong gain in application activity for conventional and government purchase loans, even as mortgage rates rose to their highest level – 5.53% – since 2009,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press statement. “Despite a slow start to this year’s spring home buying season, prospective buyers are showing some resiliency to higher rates. Purchase activity has now increased for two straight weeks.”
“The rapid rise in mortgages rates continues to hit the refinance market, with activity 70% below a year ago,” Kan added. “Most homeowners refinanced to lower rates in the past two years.”
7:38 a.m. ET Wednesday: Stock futures rise as investors await inflation data
Here’s where markets were trading Wednesday morning:
S&P 500 futures (ES=F): +45.75 points (+1.14%) to 4,042.50
Dow futures (YM=F): +282.00 points (+0.88%) to 32,369.00
Nasdaq futures (NQ=F): +182.75 points (+1.48%) to 12,531.75
Crude (CL=F): +$3.99 (+4.00%) to $103.75 a barrel
Gold (GC=F): +$11.30 (+0.61%) to $1,852.30 per ounce
10-year Treasury (^TNX): -6.1 bps to yield 2.932%
6:15 p.m. ET Tuesday: Stock futures steady ahead of CPI data
Here’s where markets were trading Tuesday evening:
S&P 500 futures (ES=F): -6 points (-0.15%) to 3,990.75
Dow futures (YM=F): -44 points (-0.14%) to 32,043.00
Nasdaq futures (NQ=F): -21 points (-0.17%) to 12,328.00
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.