US stock futures were little changed on Wednesday as traders waited for the CPI report that could reset expectations for the Federal Reserve's next move. Dow Jones Industrial Average futures were flat, S&P 500 futures edged up 0.2%, and contracts for the Nasdaq-100 rose 0.6% before the inflation data hit.
The numbers were not just moving in the background. Economists expected the Consumer Price Index to rise 3.4% from a year earlier in July, down from 3.5% in June, and to climb 0.1% from the prior month. A hotter-than-expected reading could strengthen the case for a September rate hike, while signs of inflation easing further could give the Federal Reserve room to hold rates steady.
That is why the market was so tightly balanced heading into the release. As of Tuesday, traders were pricing in roughly a 50-50 chance of a September rate hike even though economists were looking for inflation to cool from June. The split shows how little margin there is between a report that keeps policy on hold and one that pushes the Federal Reserve toward another increase.
The CPI report was already carrying more weight because it followed a softer-than-expected July jobs report. Inflation concerns have also been helping push global bond yields higher, with the 30-year Treasury yield holding at 5.24% on Wednesday. Brent crude futures moved close to $90 per barrel, adding another source of pressure on prices as ongoing tensions in the Middle East remained a backdrop for investors.
For now, the market is waiting on the number itself. Cisco Systems, Coherent Corp, Nebius Group and Cerebras Systems were among the major companies on the earnings calendar, but the inflation reading is the event that will decide whether stocks spend the rest of the day reacting to business results or to the Fed.
That is the story investors are trading around today, and it is the one that will matter most once the July Consumer Price Index lands.
