US pre-open: Futures drop as inflation fears rise

US stock futures were falling on Wednesday with the Nasdaq pulling back from record highs as nerves started to set in ahead of a key inflation gauge later in the week.

The Dow and S&P 500 were both down 0.6% in pre-market trade, while the Nasdaq dropped 0.7% after reaching a new closing high of 17,019.88 on Tuesday, helped by a surge in the price of chip giant Nvidia. Nvidia futures were showing losses of around 0.5% before the opening bell.

"With Friday bringing both the eurozone CPI and US core PCE inflation metrics, this week could serve to highlight the growing concern that we are likely to see inflation remain above 2% for the remainder of this year," said Joshua Mahony, chief market analyst at Scope Markets.

On Tuesday, Neel Kashkari, the president of the Minneapolis Federal Reserve, dampened market sentiment after saying that the Fed is looking for "many months" of positive inflation data before it considers cutting interest rates. He also said that rate hikes weren't strictly out of the question just yet.

Adding to inflationary concerns on Wednesday was yet another rise in the price of oil, as ongoing violence in the Middle East and increased speculation about output cuts propped up crude for the second straight session. Following strong gains on Tuesday, WTI crude was up a further 0.8% at $80.46 a barrel – its highest level in four weeks.

"There are meetings between OPEC and OPEC+ members this coming weekend. The expectation is that the group will extend its current production cuts from June through to the end of September," said David Morrison, senior market analyst at Trade Nation.

Economic data was thin on the ground on Wednesday, with the Richmond Fed manufacturing index the only major release of the day, at 1000 EDT. However, speeches from Federal Reserve members John Williams and Raphael Bostic will be closely watched later, along with the publication of the Fed's Beige Book, which reports on the current US economic situation across the 12 Federal Reserve Districts.

In corporate news, shares in retail brokerage Robinhood surged after hours on Tuesday following the announcement of a $1bn share buyback.

Meanwhile, carrier American Airlines plummeted after cutting its sales and profit forecasts for the second quarter.