US pre-open: Futures sharply following CPI reading

Wall Street futures were firmly in the red ahead of the bell on Monday as last month's hotter-than-expected CPI reading and expectations of a Federal Reserve rate hike later in the week remained in focus.

As of 1225 BST, Dow Jones futures were down 1.79%, while S&P 500 and Nasdaq-100 futures had the indices opening 2.24% and 2.89% lower, respectively.

The Dow closed 880.0 points lower on Friday, extending losses recorded in the previous session as market participants zeroed in on May's consumer price index report, which revealed the cost of living in the US rose more quickly than expected amid broad-based gains by categories.

The short-term two-year Treasury yield rose by 12 basis points to 3.191% prior to the open on Monday, after briefly exceeding 3.2% to reach its highest level since 2007 as Wall Street traders continued to bet the central bank will likely have to get even more aggressive than initially expected in order to squash inflation.

The two-year note also traded above the 10-year note early on Monday - a move often seen as a recession indicator. However, the yield on the benchmark 10-year Treasury note later advanced more than seven basis points to sit up above its two-year counterpart at 3.24%.

Also in focus, gasoline prices exceeded $5 per gallon over the weekend, exacerbating concerns stemming from rising inflation and falling consumer confidence and sending recession-sensitive stocks like Marriott, Hilton, and Delta Airlines down in pre-market trading.

Bitcoin slumped from more than $29,000 on Friday to less than $24,000 on Monday amid efforts by risk-averse investors to cryptocurrency assets amid rising rates.

AvaTrade's Naeem Aslam said: "Risk off-trade is in full swing as the US, and European futures continues to plunge and have started the week on the back foot again. Looking at the sentiment in the market, it is evident that traders and investors are highly pessimistic, and it is highly likely that we will see more losses for the US stock market. This, despite Wall Street posting one of its worst weekly performances on Friday for this year.

"The US consumer sentiment reading released on Friday pushed traders and investors further into the corner. The reading flirted with the level of 50, which made investors immensely nervous. In addition, the US CPI also had a multi-decade high reading, which confirmed that there is much more pain for the US economy. This is chiefly because the Fed will have to make difficult decisions in the coming weeks. The Fed, which will be announcing its monetary policy decision later this week on Wednesday, is expected to take further action to tame inflation readings. But here is the biggest dilemma for the Fed if they continue to increase the interest rate like they have seen doing, it is likely to slow the growth of the biggest economy in the world. The consumer sentiment reading released on Friday has already started to flirt with the level of 50."

On the macro front, consumer inflation expectations for May will be published at 1600 BST and Federal Reserve vice chair Lael Brainard will deliver a speech at 1900 BST.

In the corporate space, Oracle will issue on update on recent trading after the close.

Reporting by Iain Gilbert at Sharecast.com