Futures Jump Ahead of Inflation Data

Economists are already forecasting another month of 40-year-high inflation that could further solidify expectations for a significant rate hike this month.

As central banks raise borrowing costs to stamp out runaway inflation aggressively, fears of an economic downturn have escalated, sparking one of the worst Wall Street selloffs in decades in the year’s first half.

All three main indexes ended sharply lower on Tuesday, with the benchmark S&P 500 falling for a third consecutive session, as fears of a recession were exacerbated by the inversion of the two-year-/10-year yield curve. [U.S./]

The Labor Department’s report, due at 8:30 am E.T. (1230 GMT) should show the Consumer Price Index (CPI), which tracks the prices that urban consumers spend on a basket of goods, jumped in June on both a monthly and annual basis by 1.1% and 8.8%, respectively.

However, the so-called “core” CPI, which excludes volatile food and energy prices, is cooling down to 5.7% yearly.

Quarterly Results Ahead

A stronger-than-expected monthly payroll data cemented expectations for a 75 basis point rate hike in July. However, growing worries about a recession have tempered bets on how high the Fed will hike rates.

This month, traders’ bets of a 75 basis points rate hike stood at 88.2% per CME Group’s (NASDAQ: CME) Fed watch tool.

JPMorgan Chase & Co (NYSE: JPM) and Morgan Stanley (NYSE: M.S.) will be the first among big U.S. banks to report quarterly results this week, kicking off the second-quarter reporting season in earnest.

Earnings reports will show how companies are coping with rising costs. Meantime, investors also closely watch profit forecasts to gauge the likelihood of a recession.