U.S. stock futures struggling for momentum ahead of inflation report

What’s driving markets

Index futures were becalmed near recent highs ahead of the July consumer-price index report on Wednesday.

Hopes that inflation may have peaked and that the Federal Reserve may thus be able to adopt a less aggressive monetary tightening cycle has helped the S&P 500 index bounce nearly 13% from its 2022 low touched in mid June.

A corporate second quarter earnings reporting season that was not as bad as feared has also underpinned sentiment in recent weeks.

However, a sales warning from semiconductor former darling Nvidia Corp.
NVDA
on Monday has given bulls some pause for thought. And analysts warn the market’s optimistic tone of late will be further challenged should the CPI report come in hotter than expected.

Read: Nvidia is hit by another ‘crypto hangover,’ and that isn’t the only problem

“This temporary calm could clearly all change tomorrow with the latest U.S. CPI so maybe the next 30 hours will be the calm before the storm or perhaps herald in the real start of the dog days of summer,” said analysts at Deutsche Bank.

See: A surging stock market is on the verge of signaling a ‘huge’ move — but there’s a catch

Economists forecast that a dip in energy prices will help headline year-over-year CPI for July fall from the multidecade high of 9.1% to 8.7%.

Economic data on Tuesday showed U.S. productivity fell at a 4.6% annual rate in the second quarter, while unit labor costs shot up 10.8%.

Meanwhile, the debate continues over whether the latest stock market advance is the start of a more prolonged uptrend or a rally that will fail when faced with slower economic growth and higher interest rates.

Read: Why the S&P 500’s ‘bounce within a bear market’ could fizzle before it hits 4,200

Wells Fargo strategists warned that profit projections were too rosy. “We expect slowing revenue growth and higher costs to squeeze margins in the coming quarters, likely leading to an earnings recession over the next 12 months,” the Wells Fargo analysts said in a note to clients.

Need to Know: The red flag that preceded a halving of global equities in 2000 and 2007 is back, warns Citi

The “meme-stock” phenomenon was back on display, with Bed Bath & Beyond Inc.
BBBY
shares soaring 36% Monday with no apparent news driving the move. AMC Entertainment Holdings Inc.
AMC
and GameStop Corp.
GME
also jumped Monday.

Shares of all three were lower in premarket action Tuesday.

Also see: Bed Bath & Beyond leads rally in ‘meme’ stocks as Reddit group appears to be jumping back on board

Companies in focus

• Shares of Micron Technology Inc.
  MU
  fell in premarket trade, after the memory-chip company said that it expects “challenging” market conditions for the current quarter and the next one.

• Novavax Inc.
  NVAX
  shares slumped by more than 30% after executives at the vaccine maker late Monday slashed their annual sales guidance in half while wildly missing financial expectations.

• Shares of Take-Two Interactive Software Inc.
  TTWO
  dropped more than 4% after the videogame publisher revised its outlook lower, to not only account for its recent acquisition of Zynga but for shifts in the release dates of some titles.

• Applebee’s and IHOP restaurant chains parent Dine Brands Global Inc.
  DIN
  reported second-quarter profit and revenue that beat Wall Street forecasts, citing “sustained off-premise traffic” and a continued recovery of dining in.

• Hyatt Hotels Corp.
  H
  on Tuesday reported profit and revenue that topped expectations amid growth in hotel demand. Hyatt shares were up more than 2%.

How are other assets faring

• Oil turned higher after news reports said Russia cut off pipeline crude flows to southern Europe. The U.S. benchmark
  CL
  rose 1.2%, to trade just below $92 a barrel.

• The 10-year Treasury yield
  BX:TMUBMUSD10Y
  rose 4.6 basis points to 2.808%. Yields and debt prices move opposite each other.

• The ICE U.S. Dollar index
  DXY,
  a measure of the currency against a basket of six major rivals, fell 0.3%, while gold
  GC00
  ticked up 0.2% to trade above $1,808 an ounce.

• Bitcoin
  BTCUSD
  fell 2.2% to trade below $23,300.

• Asia markets were mostly softer, with Hong Kong’s Hang Seng
  HK:HSI
  down 0.2% and Japan’s Nikkei 225
  JP:NIK
  off 0.9%. In Europe, the Stoxx 600
  XX:SXXP
  fell 0.7%, while London’s FTSE 100
  UK:UKX
  was flat.