Stock futures rose on Wednesday after another tepid inflation reading sent the major averages down to their worst day since June 2020 and dampened investor expectations for a less brutal Federal Reserve.
Futures tied to the Dow Industrial Average were last up 86 points, or 0.3%, while S&P 500 futures rose 0.3% and Nasdaq 100 futures gained 0.3%.
The Dow sank more than 1,200 points on Tuesday, or nearly 4%, while the S&P 500 lost 4.3%. The Nasdaq Composite fell 5.2%.
The market moves came after August’s consumer price index report showed headline inflation rose 0.1% on the month despite a drop in gas prices.
The hot inflation report left questions about whether stocks could return to June lows or fall further. It also sparked some fears that the Federal Reserve could hike even beyond the 75 basis points that markets are pricing in.
“It caught the market off guard,” said Quincy Krosby of LPL Financial. “The market expected at least that we would have stabilized, maybe not going lower, but certainly not going higher. It was the wrong direction and the concern, of course, always comes down to what that means for the Fed.” .
All 30 Dow stocks and S&P 500 sectors ended the session lower, led by a decline in communications services. The sector fell 5.6% and ended its worst day since February, dragged down by shares of big tech names like Netflix and Meta Platforms, which fell around 7.8% and 9, 4%, respectively.
A reading of the producer price index is due on Wednesday morning and could provide more clues about the state of inflation ahead of the Fed’s rate hike meeting next week.