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U.S. STOCK FUTURES RISE, YIELDS SLUMP, AFTER COOLER-THAN-EXPECTED CPI

The main U.S. equity index futures are in positive territory, and yields are lower, after the release of the latest data on U.S. consumer prices which came in below estimates.

E-mini S&P 500 futures EScv1 are now up around 0.2% versus a loss of around 0.1% just before the numbers came out. U.S. stock index futures were edging lower ahead of the data even though President Donald Trump said on Wednesday the U.S. deal with China is done, pending approval by him and President Xi Jinping.

May headline CPI month-over-month and year-over-year came in cooler-than-expected. The month-over-month and year-over-year core prints were also below the Reuters Poll numbers.

Separately, the mortgage market came in at 254.6 vs 226.4 last week:

According to the CME's FedWatch Tool, the probability that the Fed sits on its hands and leaves its current target rate of 4.25%-4.50% unchanged at its June 17-18 FOMC meeting is at about 100%, which is essentially unchanged from just before the data was released.

Looking out further out into 2025, the market is showing a bias for two rate cuts to occur, one in September and one in December. Interest rate probabilities are pricing in a total of 49.5 basis points of cuts through year end.

The U.S. 10-Year Treasury Yield US10YT=RR is now around 4.43%. It was around 4.50% just before the numbers came out. The yield ended Tuesday at 4.474%.

Most S&P 500 index .SPX sector SPDR ETFs are quoted higher in premarket trade. Energy XLE.P, and consumer discretionary XLY.P, both up about 1%, are posting the biggest gains.

The SPDR S&P regional banking ETF KRE.P is trading up around 0.8%.

Regarding the tariff deal and the inflation data, Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said:

"The post from Trump about the trade deal with China threatened to suck the air out of the importance of this CPI number. A 55% tariff on China does not seem like a good deal for households and businesses in America, but it was slightly better than the 60% tariff platform he campaigned on."

Jacobsen added "The CPI number was a lot tamer than expected. A lot of imported food items had relatively high inflation, like bananas rising 3.3% in price and toy prices rising 2.2%. Egg deflation is taking place with prices falling 2.7%."

"A little stability with trade policy could go a long way to help keep inflation from derailing. This is another example of why the Fed may shift its balance of risks to focusing more on growth threats than inflation threats."

Here is a premarket snapshot from around 08:55 a.m. EDT:

(Terence Gabriel, Chuck Mikolajczak)

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