U.S. stock index futures moved higher on Tuesday, signalling a positive start to trading after the previous session’s broad-based sell-off, as investors welcomed inflation figures that came in weaker than expected.
The latest Consumer Price Index (CPI) report eased concerns over persistent inflation and reduced fears that the Federal Reserve may need to tighten monetary policy further.
Inflation Slows More Than Forecast
According to the U.S. Labor Department, consumer prices fell 0.4% in June after rising 0.5% in May. Economists had expected a more modest decline of 0.1%.
On an annual basis, headline inflation slowed to 3.5% from 4.2%, comfortably below the consensus forecast of 3.8%.
Core CPI, which excludes food and energy prices, was unchanged during June following a 0.2% increase in May. Analysts had expected another monthly increase of 0.2%.
Annual core inflation also eased to 2.6% from 2.9%, outperforming expectations for a reading of 2.8%.
Rate Cut Hopes Lift Market Sentiment
The softer inflation data is expected to ease pressure on policymakers and reduce expectations that interest rates will need to remain elevated for longer.
Technology stocks were among the biggest beneficiaries, with Nasdaq 100 futures advancing around 1.2% as investors looked to recover some of Monday’s losses.
IBM Weighs on Dow Futures
Despite the broader improvement in sentiment, IBM (NYSE:IBM) remained a notable drag after the company released preliminary second-quarter results that disappointed investors.
Shares of the technology giant plunged more than 22% in premarket trading, limiting gains for Dow Jones futures.
Wall Street Ended Monday Under Pressure
U.S. equities closed sharply lower on Monday, reversing gains from the previous two sessions.
The Nasdaq dropped 408.43 points, or 1.6%, to finish at 25,873.18, while the S&P 500 declined 60.05 points, or 0.8%, to 7,515.34.
The Dow Jones Industrial Average slipped 138.37 points, or 0.3%, ending the session at 52,498.64.
Oil Surge and Geopolitical Risks Hit Markets
Investor sentiment weakened on Monday after crude oil prices surged nearly 9% amid escalating military tensions between the United States and Iran.
The U.S. Central Command confirmed a fresh round of strikes targeting multiple locations in Iran, while Tehran responded with attacks on Bahrain, Kuwait, Qatar, Jordan and Oman, increasing concerns over regional stability.
President Donald Trump also announced the reinstatement of a U.S. blockade of Iranian ports and said the United States would charge a 20% fee on cargo travelling through the Strait of Hormuz as the “Guardian of the Hormuz Strait.”
Semiconductor Stocks Lead Monday’s Decline
Technology shares were also pressured by a sharp sell-off in SK Hynix (USOTC:HXSCL), whose U.S.-listed shares fell more than 9% after a strong debut last week.
The weakness pushed the Philadelphia Semiconductor Index down 4.8%, while the NYSE Arca Computer Hardware Index lost 3.3%.
Airline, gold and networking stocks also declined, while energy companies outperformed as higher oil prices boosted the sector.