Futures tied to the main U.S. equity benchmarks traded modestly lower on Tuesday, as investors positioned themselves for a key inflation release and the opening wave of quarterly earnings. Markets are also digesting political fallout linked to an investigation involving the Federal Reserve, while oil prices continued to climb amid unrest in Iran.
Futures ease back
U.S. equity futures slipped in early trading as caution set in ahead of the latest economic data and bank earnings. By 03:05 ET, Dow futures were down 46 points, or 0.1%, S&P 500 futures had fallen 6 points, or 0.1%, and Nasdaq 100 futures were lower by 39 points, or 0.2%.
Wall Street closed higher on Monday, recovering from earlier weakness sparked by concerns over the implications of a criminal investigation into Fed Chair Jerome Powell and President Donald Trump’s proposal to cap credit card interest rates. Gains were ultimately supported by strength in several sectors, including technology, consumer staples and materials.
“Overall, the narrative is largely the same now as it was on Friday, with bulls still in control thanks to improving growth dynamics, healthy earnings, evidence of a generational improvement in productivity, and stimulus […] anticipation,” analysts at Vital Knowledge said in a note.
Backlash over Powell investigation
The Trump administration has come under sharp criticism for authorizing a criminal investigation into Powell, drawing pushback from former Federal Reserve leaders and members of Trump’s own Republican Party.
Reuters, citing people familiar with the matter, reported that the probe was approved and initiated by Jeanine Pirro, the U.S. Attorney for Washington and a Trump ally, without the knowledge of Attorney General Pam Bondi or Deputy Attorney General Todd Blanche. In a social media post, Pirro said the Justice Department acted after the Fed declined to discuss cost overruns tied to the renovation of its Washington headquarters, adding that her office “makes decisions based on the merits.”
The move has raised fresh concerns about the Fed’s independence and pushed U.S. Treasury yields higher. Former Fed Chairs Janet Yellen, Ben Bernanke and Alan Greenspan condemned the investigation, saying “[t]his is how monetary policy is made in emerging markets with weak institutions,” and warned of the “negative consequences” for inflation and the broader economy.
Republican Senator Thom Tillis also criticized the probe, calling it a “huge mistake,” a view echoed by several of his colleagues.
Inflation data in focus
Attention now turns to the release of December U.S. consumer price index data, one of the most closely watched inflation indicators and a key input for the Federal Reserve ahead of its policy meeting later this month.
Headline CPI is expected to show annual inflation of 2.7% in December, unchanged from November, with month-on-month growth also seen holding at 0.3%. Core CPI, which excludes food and energy, is forecast to edge up to 2.7% year on year from 2.6%, and to 0.3% on a monthly basis from 0.2%.
ING analysts cautioned that core inflation could come in hotter than expected, arguing that a prolonged U.S. government shutdown distorted November data collection. “Compared with the full month of November 2024, this timing likely skewed that inflation reading lower. Reverting to more standard collection timings in December means risks of a hotter read,” they wrote.
While the Fed has recently focused more on signs of a cooling labour market when cutting rates late last year, persistently firm inflation could complicate the outlook. Markets broadly expect the Fed to leave rates unchanged at 3.50%–3.75% at its next meeting, according to CME FedWatch.
Bank earnings kick off
Market sentiment may also be influenced by earnings from major U.S. lenders, starting with JPMorgan Chase (NYSE:JPM) later on Tuesday. Results from Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) are due on Wednesday, followed by Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) on Thursday.
Together with inflation data, the performance of the banking sector could help shape market direction in the opening weeks of 2026. Although the S&P 500 has risen so far this year after posting a third consecutive year of double-digit gains in 2025, uncertainty remains around the future path of interest rates and heightened geopolitical tensions.
Strong bank results could offer reassurance about the health of corporate America and help steady investor confidence.
Oil prices extend rally
Oil prices advanced for a fourth straight session, as escalating anti-government protests in Iran heightened concerns over potential supply disruptions from the major OPEC producer.
Brent crude futures rose 0.5% to $64.16 a barrel, while U.S. West Texas Intermediate gained 0.8% to $59.82. Brent hit a seven-week high in the previous session, and WTI climbed to its highest level in a month.