Stock Futures Tick Higher as Traders Await Key Inflation Readings This Week

Stock futures are ticking higher on Monday as traders eagerly await the first of two key inflation readings scheduled for this week. The market is hoping for a benign inflation report, which could boost investor sentiment and drive stocks higher. The Dow Jones Industrial Average (DJIA) futures are up 0.7%, while S&P 500 futures have gained 1.1%, and Nasdaq Composite futures have risen 1.3%.



Investors are betting on a soft inflation reading, which could signal that the Federal Reserve (Fed) may ease up on its aggressive interest rate hikes. The consumer price index (CPI) for August is expected to show a month-over-month decrease of 0.1%, while still rising 8.1% year-over-year. A softer-than-expected inflation print could indicate that the Fed's rate hikes are starting to have an impact on prices, potentially leading to a pause or slowdown in future rate increases.



If the CPI data comes in as expected or softer, it could provide a much-needed boost to stocks, which have been volatile in recent weeks due to concerns about inflation and the Fed's monetary policy. A soft inflation reading could also increase the likelihood of a 50 basis point (bps) rate hike by the Fed at its September meeting, instead of the widely expected 75 bps hike.

However, some Fed speakers have recently emphasized their commitment to fighting inflation, suggesting that even a softer-than-expected CPI reading may not change the central bank's course in the near term. Christopher Waller and Loretta Mester, both Fed voting members, have stated that the Fed will remain vigilant in its fight against inflation, even if the CPI data comes in softer than expected.



In addition to the CPI data, traders will also be keeping an eye on the producer price index (PPI) report, scheduled for release on Thursday. The PPI is a leading indicator of consumer prices, and a soft reading could further bolster the case for a pause or slowdown in rate hikes.

The market's optimism is also reflected in the U.S. Dollar Index (DXY), which has been sliding in recent days. The DXY is down 0.8% on Monday, with the dollar almost 3% lower from its 20-year high reached last week. The weaker dollar is adding strength to crude oil prices, as futures contracts for oil are priced in dollars. West Texas Intermediate (WTI) crude oil futures are up 1.3% on Monday, nearing $88 per barrel.

Investors are also keeping an eye on geopolitical developments, particularly the situation in Ukraine. With Russia suffering major setbacks, there is hope that Vladimir Putin may be forced to return to the bargaining table, potentially leading to a ceasefire and easing some of the market's bearish underpinnings.

As the market awaits the key inflation readings this week, investors will be closely watching the data and the Fed's reaction to it. A soft inflation reading could provide a much-needed boost to stocks, while a hotter-than-expected print could lead to further volatility and uncertainty. In either case, the market's focus will remain squarely on the Fed's monetary policy and its impact on inflation and economic growth.