US pre-open: Futures in the green following CPI-fuelled sell-off

As of 1230 BST, Dow Jones futures were up 0.16%, while S&P 500 and Nasdaq-100 futures were 0.30% and 0.59% firmer, respectively.

The Dow closed 876.05 points lower on Monday, extending losses recorded following Friday's hotter-than-expected CPI report.

In focus ahead of the bell on Tuesday, market participants were continuing to prepare for the possibility of a larger-than-expected rate hike from the Federal Reserve on Friday after the Wall Street Journal suggested that the central bank will likely mull over the benefits of a 75-basis-point increase.

However, some investors also expect to see a more hawkish tone from the Fed on the back of last Friday's red hot inflation report.

The bond market was also drawing an amount of investor attention, with the yield on both the two-year and ten-year Treasury notes easing off from the previous session's highs to 3.280% and 3.306%, respectively.

AvaTrade's Naeem Aslam said: "US and European stock futures are bouncing off their yesterday's low after tanking due to the ongoing concerns that a sharp rate hike by the Fed could result in further economic weakness. The S&P has declined over 9% during the past three days as traders and investors continue to sell riskier assets.

"Basically, what we are seeing is a flight to safety, but at the same time, it is immensely difficult for traders to find safety in this environment as pretty much everything is falling, including gold and Bitcoin."

On the macro front, the National Federation of Independent Business' small business optimism index dipped to 93.1 in May, down from 93.2 in April to the lowest level seen since April 2020, with the lion's share of owners expecting business conditions to hit a record low over the next six months.

Still to come, May's producer price index will be published at 1330 BST.

No major corporate earnings were slated for release on Tuesday.

Reporting by Iain Gilbert at Sharecast.com