U.S. equity futures edged lower in early Thursday trading, while Treasury yields and the dollar bumped higher, as investors added the threat of a U.S. government shutdown to a growing list of concerns tied to the fate of the world’s biggest economy.
Stocks ended higher on Wednesday, snapping a brutal two-day losing streak on Wall Street, the worst since August, following a modestly softer-than-expected February inflation report that induced some buying for beaten-down stocks.
Trade war concerns, however, continue to cast a pall over global risk appetite, and President Donald Trump’s threat to match retaliatory tariffs planned by the European Union, as well as the ongoing tit-for-tat with Canada, kept a lid on gains yesterday and will likely remain a concern heading into today’s session.
At the same time, Democratic Senator Chuck Schumer said he and his colleagues won’t support a Republican plan to keep the government from shutting down this weekend, and instead offered a shorter bill alternative with input from both sides of the upper chamber.
That leaves the likelihood of a least a short cessation of government activities this week, and perhaps into next week, adding another component of concern to global investors’ lists.
Fed Chair Jerome Powell and his colleagues will keep close tabs on today’s PPI report as they prep new growth and inflation forecasts for their policy meeting next week.
A further worry could also materialize today in the form of the Commerce Department’s producer price inflation report, many components of which feed into the Federal Reserve’s preferred PCE Price Index used to gauge interest rate forecasts.
Analysts are once again looking for modest easing in factory gate price pressures, but any uptick tied to tariff increases will likely jolt markets, which remain on high alert for any indication of further economic weakness.
“Tariff fears are pushing companies to increase prices, raising the likelihood of higher inflation this summer and complicating the Fed’s policy amid recession concerns,” said George Vessey, lead FX & macro strategist at Austria-based Convera.
“Today’s producer price index components that affect the Fed’s preferred inflation measure are expected to accelerate from January, making it difficult for the Fed to cut rates despite slowing economic activity,” he added. “Consequently, the outlook for equities and overall risk appetite appears bleak.”
Related: CPI inflation surprise resets tariff talk
Heading into the start of the trading day on Wall Street, as well as the PPI inflation report and weekly jobless claims data at 8:30 am Eastern time, futures tied to the S&P 500 suggest a modest 8 point opening bell decline.
The Dow Jones Industrial Average, meanwhile, is called 5 points lower with the tech-focused Nasdaq set for a 26 point opening bell dip.
Stocks on the move include Intel (INTC) , which jumped 10% in after-hours trading last night after the chipmaker named Lip-Bu Tan as its new CEO, a move seen as paving the way for the separation of its foundry business.
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In Europe, the Stoxx 600 was marked 0.29% higher in mid-day Frankfurt trading, while the FTSE 100 gained 0.43% in London.
Overnight in Asia, a firmer yen kept the Nikkei 225 in negative territory for the session, with the benchmark ending 0.08% lower, while the region-wide MSCI ex-Japan benchmark fell 0.72% into the close of trading.
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