Stock market futures edged higher Tuesday morning, with investors awaiting the July Consumer Price Index (CPI) report that could shape expectations for Federal Reserve policy. The data, set for release at 8:30 a.m. ET, is expected to show inflation accelerating slightly amid ongoing tariff pressures.
The Dow Jones Industrial Average futures gained 61 points (0.1%). S&P 500 futures inched higher, and Nasdaq 100 futures also traded slightly positive. The S&P 500 currently hovers near record highs, adding weight to the upcoming inflation reading.
CPI forecast points to moderate acceleration
Economists expect headline CPI to increase 0.2% month-over-month in July and 2.8% year-over-year, up from June’s 2.7% annual pace. Lower gasoline prices and softer food inflation should limit the monthly rise, but price pressures remain.
Core CPI, which excludes food and energy, is forecast to rise 0.3% monthly and 3.0% annually. That would mark the largest monthly increase in six months, signaling stronger underlying price growth.
Rising costs in categories like apparel, footwear, and furniture have emerged in recent months as tariff pressures filter through supply chains. In June, apparel prices rose 0.4%, footwear gained 0.7%, and furniture increased 0.4% after prior declines.
Tariffs drive part of the inflation story
The effective U.S. tariff rate now stands at 18.6%, the highest since 1933, according to Yale Budget Lab data. President Donald Trump recently extended a 90-day pause on higher tariffs for Chinese goods, giving businesses some breathing room.
Wells Fargo economist Sarah House said the July CPI will likely show more evidence of tariffs pushing up consumer prices. She expects inflation to trend near 3% through year-end but not accelerate sharply.
Fed rate cut bets grow despite inflation pressures
Market pricing shows an 87% probability of a Fed rate cut in September, according to CME’s FedWatch Tool. Investors expect the central bank to prioritize labor market concerns after recent downward revisions to job growth data.
Citi analyst Stuart Kaiser said the CPI report could create a “dual headache” for the Fed: inflation that stays above target and a job market that shows signs of strain.
Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, cautioned against assuming that rate cuts will fully offset tariff-related economic drag.
Global markets post mixed results
Overnight, Asia-Pacific markets mostly rose:
- Japan’s Nikkei 225: +2.15%
- China’s CSI 300: +0.52%
- Hong Kong’s Hang Seng: +0.25%
South Korea’s Kospi and Kosdaq indexes fell, while Australia’s ASX 200 rose 0.41%.
In Europe, stocks posted modest early gains as traders awaited U.S. data.
What’s next for markets
Investors will monitor Thursday’s Producer Price Index (PPI) for signs of wholesale inflation trends. Later this month, central bankers will gather in Jackson Hole, Wyoming, for the Fed’s annual symposium, which could set the stage for the September policy meeting.
If the CPI report matches or beats forecasts, traders may increase bets on a September rate cut, though a hotter-than-expected reading could dampen those expectations and spark volatility.
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