LIVE MARKETS-US stock futures pressured by hotter-than-expected PPI

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US STOCK FUTURES PRESSURED BY HOTTER-THAN-EXPECTED PPI

The main U.S. equity index futures are lower, while the U.S. 10-year Treasury yield is higher, after the release of the latest data on U.S. producer prices and jobless claims.

That said, e-mini S&P 500 futures EScv1 losses are relatively contained. The futures are only off around 0.4% vs being roughly flat just before the numbers came out.

July headline PPI month-over-month was 0.9% vs a 0.2% estimate. The year-over-year print was 3.3% vs a 2.5% Reuters Poll. The month-over-month exFood/Energy number was 0.9% vs a 0.2% estimate. The year-over-year exFood/Energy number was 3.7% vs a 2.9% Reuters Poll.

Separately, initial jobless claims came in at 224,000 vs a 228,000 estimate.

According to the CME's FedWatch Tool, the probability that the Federal Reserve delivers a 25 basis point (bp) rate cut at its September 16-17 FOMC meeting is now around 97% vs about 100% just before the data was released. The chance the FOMC leaves its current target rate of 4.25%-4.50% unchanged is now around 3% vs 0% prior to the numbers.

Looking out further into 2025, the market is showing a bias for two more rate cuts to occur with one in October and one in December. Interest rate probabilities are pricing in a total of around 59 basis points of cuts through year-end vs around 63 bps just before the data.

The U.S. 10-Year Treasury yield US10YT=RR is now around 4.25%. It was around 4.21% just before the numbers came out. The yield ended Wednesday at 4.24%.

All S&P 500 index .SPX sector SPDR ETFs are quoted down in premarket trade. Consumer Discretionary XLY.P and Industrials XLI.P, both down around 0.6%, are posting the biggest losses.

The SPDR S&P regional banking ETF KRE.P is trading down more than 1.5%.

Regarding the inflation data, Chris Zaccarelli, chief investment officer at Northlight Asset Management in Charlotte, N.C., said:

"The large spike in the Producer Price Index (PPI) this morning shows inflation is coursing through the economy, even if it hasn’t been felt by consumers yet."

Zaccarelli added, "Given how benign the CPI numbers were on Tuesday, this is a most unwelcome surprise to the upside and is likely to unwind some of the optimism of a 'guaranteed' rate cut next month."

Here is a premarket snapshot from around 08:53 a.m. EDT:

(Terence Gabriel, Sruthi Shankar)

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