U.S. stock index futures edged lower on Wednesday as higher oil prices raised concerns about inflation and interest rates. Labor Department consumer price index (CPI) data, due to be released later today, is expected to show a 4.3% year-on-year decline in core CPI in August, while headline inflation is expected to rise 3.6%. Rising energy prices are believed to be contributing to this potential increase in inflation.
Expectations of tight oil supplies for the rest of the year have kept oil prices near 10-month peaks. This has raised even more concerns about inflation and its potential impact on interest rates. Higher oil costs are likely to affect headline inflation, and any increase in underlying data could have a significant impact on interest rates.
The Federal Reserve and central banks around the world are already grappling with the challenge of inflation at a time when it is less desirable. If inflation continues to rise, it could pose challenges for policymakers in their efforts to maintain economic stability.
Market analysts expect the Federal Reserve to leave interest rates unchanged in September, with a likely pause in November and December. The Federal Reserve is unlikely to cut interest rates until the second quarter of next year, according to a Reuters poll.
Investors are also closely watching August’s producer price and retail sales data, scheduled for release on Thursday, as it will provide more insight into the economy ahead of the Federal Reserve’s next policy decision.
In premarket trading, Dow futures fell 0.12%, S&P 500 futures fell 0.12% and Nasdaq 100 futures fell 0.15%. Apple shares fell 0.5% after the launch of new iPhone models, while Ford shares rose 1.8% on plans to boost production of F-150 hybrid pickup trucks. U.S. shares of Chinese electric vehicle makers Li Auto, Nio and Xpeng fell amid the European Commission’s investigation into possible tariffs on their vehicles. Spirit Airlines shares fell 3.4% after the company revised its third-quarter revenue forecast to reflect rising fuel prices. In contrast, shares of Moderna rose 2.4% after testing of its flu vaccine met its primary goal.