US pre-open: Futures little changed ahead of CPI reading

Wall Street futures were little changed ahead of the bell on Wednesday as market participants held their breath for last month's all-important consumer price index report.

As of 1220 BST, Dow Jones and S&P 500 futures were both up 0.04%, while Nasdaq-100 futures were 0.03% lower.

The Dow closed 126.60 points higher on Tuesday, reversing losses recorded in the previous session as investors thumbed over last month's producer price index, which revealed that US producer prices rebounded more than expected last month after a downwardly revised fall in March, with the annual rate of inflation rising to its highest level in a year.

The Bureau of Labor Statistics said its producer price index increased by 0.5% month-on-month in April, compared with a downwardly revised fall of 0.1% in March, more than expected and bumping the annual rate of inflation up to its highest level in a year.

However, attention will now turn to today's consumer price index, due out at 1330 BST, with Wall Street expecting to see headline CPI rise 0.4% month-on-month, or 0.3% when stripping out volatile food and energy costs. Economists also forecast a 3.4% year-on-year increase for headline CPI, following a 3.5% rise in March.

Trade Nation's David Morrison said: "Today sees the release of the latest US inflation update covering April. Traders appear to be positioning themselves for a lower CPI number, following a jump in the Headline number to 3.5% year-on-year in March. The consensus is for a modest drop to 3.4%, and given the current bullish sentiment in equities, that should be enough to trigger a rally, at least in the short term.

"Yesterday's producer prices index, both core and headline month-on-month, came in well above expectations, while there was a jump to 2.2% year-on-year from 1.8% previously. This news was largely shrugged off by traders, providing further evidence of the current strength of bullish sentiment. But it should also ring some warning bells, as the PPI has a significant weighting towards services, as does the Fed's preferred inflation measure, core PCE. The next update on the latter comes at the end of the month."

Elsewhere on the macro front, US mortgage applications rose 0.5% in the week ended 10 May, according to the Mortgage Bankers Association of America, following on from a 2.6% jump in the previous week and came alongside a 10 basis point reduction in the average mortgage. Applications to refinance a mortgage jumped by 5% from the previous week, while applications to purchase a home dropped by 2%.

Still to come, April retail sales and the New York Fed's Empire State manufacturing index will be out at 1330 BST, while March business inventories and the NAHB's May housing market index will be published at 1500 BST.

Reporting by Iain Gilbert at Sharecast.com