US futures pop after CPI, with Fed looming

US stock futures rose on Wednesday after a fresh reading on inflation showed consumer prices increased less than expected in May. The latest snapshot of inflation comes hours before a highly anticipated Federal Reserve meeting in the afternoon will provide the latest signal on the path of interest rates.

S&P 500 futures (ES=F) built on a 27th record close of the year, rising 0.7%. Futures on the tech-heavy Nasdaq 100 (NQ=F) rose nearly 0.9%, also pointing to gains after a record close for the index. Dow Jones Industrial Average futures (YM=F) gained 0.6%.

The Consumer Price Index (CPI) remained flat over the previous month and rose 3.3% over the prior year in May — a deceleration from April’s 0.3% month-over-month increase and 3.4% annual gain in prices. Both measures beat economist expectations. On a “core” basis, which strips out the more volatile costs of food and gas, prices in May climbed 0.2% over the prior month and 3.4% over last year — cooler than April’s data. Both measures also came in better than economist estimates.

Read more: How does the labor market affect inflation?

Meanwhile, the Fed’s decision is all but certain — the central bank is expected to keep rates at their current 23-year-high levels. Investors will be more closely watching the release of the Fed’s updated economic projections in its “dot plot” — specifically, how many rate cuts it projects for the rest of the year.

Last we heard, in March, it was three. Policymakers are almost certain to slash that, thanks in part to the aforementioned inflation’s stickiness to start this year. Those projections, along with what Fed Chair Jerome Powell says in his press conference, could be the last market-moving events in an extraordinarily busy day.

In corporates, Apple (AAPL) shares cooled off after surging to a record high on Tuesday. Shares fell 0.2% premarket.

Live5 updates

  • It’s risk on in markets after the CPI print

    Stock futures shot higher after the cooler-than-expected reading on consumer prices for the month of May.

    S&P 500 futures (ES=F) built on a 27th record close of the year, rising 0.7%. Futures on the tech-heavy Nasdaq 100 (NQ=F) rose nearly 0.9%, also pointing to gains after a record close for the index. Dow Jones Industrial Average futures (YM=F) gained 0.6%.

    Notably, interest rate-sensitive areas of the market saw the biggest gains. Futures tied to the Russell 2000 (RT=F) were up about 2.3%.

    This came as investors quickly recalibrated their expectations for rate cuts this year. Following the data’s release, markets were pricing in a roughly 69% chance the Federal Reserve begins to cut rates by its September meeting, according to data from the CME FedWatch Tool. That’s up from about a 53% chance the day prior.

  • Inflation pressures ease more than expected

    US consumer price increases cooled during the month of May, according to the latest data from the Bureau of Labor Statistics released Wednesday morning.

    The Consumer Price Index (CPI) was flat over the previous month and 3.3% over the prior year in May, a deceleration from April’s 3.4%, and lower than the 3.4% year-over-year change economists had expected.

    May’s monthly increase came in lower than economist forecasts of a 0.1% uptick.

    On a “core” basis, which strips out the more volatile costs of food and gas, prices in May climbed 0.2% over the prior month and 3.4% over last year — cooler than April’s data. Both measures were lower than economist expectations.

  • Nvidia as the sun…

    A tip of the hat to Apollo chief economist Torsten Slok for this vibe check on the S&P 500.

    Clearly, Nvidia (NVDA) is the sun that 499 other companies revolve around.

    Note: Apollo is the parent company of Yahoo Finance.

    It's an Nvidia market.It's an Nvidia market.

    It’s an Nvidia market. (Apollo)

  • JP Morgan weighs in on the Musk pay package vote

    The Tesla (TSLA) shareholder vote on Elon Musk’s $56 billion pay package is coming down to the wire.

    Ahead of the vote on Thursday, Tesla just dropped this post on Musk owned X detailing its CEO’s accomplishments (note this is weird to see from a corporate X account, but hey, this is Musk we are talking about here).

    A new Yahoo Finance poll is currently showing 96% of the people that have voted think Musk’s pay package shouldn’t be approved.

    Meantime, JP Morgan analyst Ryan Brinkman is weighing in with a note this morning:

    “While both ISS and Glass Lewis, as well as several prominent institutional and retail shareholders, have voiced opposition to the 2024 ratification of Mr. Musk’s 2018 compensation plan, we rather suspect it will pass, albeit with a lesser approval rate than in 2018 and perhaps by a lesser margin than popularly imagined. We base this expectation on anecdotal evidence of strong retail shareholder support and based on our conversations with institutional investors whose reasoning, on the whole, seems similar to when asked to vote in favor of the Solar City acquisition. Investors we spoke with then largely did not support the Solar City acquisition, but worried there would be a more negative share price reaction in the event the transaction were voted down, given the perception of a vote of no confidence.”

    Brinkman reiterated an underweight rating (sell equivalent) on Tesla shares and a $115 price target, which assumes about 32% downside from current price levels.

    Read more here on the Musk vote and key CEO pay package votes from Yahoo Finance senior legal reporter Alexis Keenan.

  • Affirm still on the move after big Apple deal

    Affirm (AFRM) is still one of the hotter tickers on the Yahoo Finance platform after news dropped Tuesday of an integration into Apple (AAPL) Pay. Shares are up 1.5% pre-market following an 11% pop yesterday.

    I caught up last night with Affirm’s founder and CEO Max Levchin for a new taping of my ‘Opening Bid’ podcast. The full episode (which goes into Levchin’s views on AI and the political vibes in Silicon Valley) will release on Friday morning on Yahoo Finance and major podcast platforms.

    But I put a clip below of Levchin’s comments on the tie-up below for you to check out.

    Levchin stops short of sharing how this deal will financially impact Affirm (could be big given the 1.4 billion iPhones out in the wild worldwide), but hinted it could be a strong top- and bottom-line contributor over time.

    He did acknowledge the deal “validates” the buy now, pay later space — which has been under siege from regulators and other parties almost since inception.

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