Wall Street steady ahead of PCE inflation data

U.S. stock futures pointed lower on Wednesday, the final day of September and the third quarter, as traders awaited a closely watched inflation report that could shape the Federal Reserve’s next policy move.

Futures tied to the Dow Jones Industrial Average were off about 0.2%, with S&P 500 contracts 0.1% in the red and Nasdaq-100 futures losing roughly 0.3%. The moves came as Treasury yields eased from recent highs, giving markets some breathing room after a turbulent session on Tuesday.

Attention has turned to the August Personal Consumption Expenditures price index figure, which serves as the Fed’s preferred measure of inflation and was set for release Wednesday morning. A Dow Jones survey of economists calls for a 0.3% monthly gain, which would bring the year-over-year rate to 3.7%.

The odds of a Fed rate increase at the October meeting fell to around 43%-49% from 71% on Monday, according to CME Group’s FedWatch tool. The shift followed remarks Tuesday from New York Federal Reserve President John Williams, who said “there is no need for urgency, and we have time to gather more information” before that meeting, according to CNBC.

Jose Torres, senior economist at Interactive Brokers, described a market under strain, saying equities are “trying to hang in there, but tighter financial conditions are emboldening the bears and lifting interest in downside hedges,” according to CNBC.

Tuesday’s session was rough. The 10-year Treasury yield climbed to near 5.3%, a level not seen since 2007, before easing to around 5.2% in early Wednesday trading. Tuesday’s selling left the Dow down more than 100 points, with the S&P 500 finishing 0.2% lower and the Nasdaq off 0.1%.

Overseas, markets were broadly positive. Japan’s Nikkei 225 advanced 1.94% and Australia’s S&P/ASX 200 finished up 0.92%. European equities were mostly firmer, with Germany’s DAX climbing 0.63% and the broad Stoxx 600 edging up 0.1%. Inflation data from France and Germany released Wednesday showed price pressures building in September, according to The Wall Street Journal.

Heading into Wednesday’s close, September has been a losing month for the S&P 500 and Dow, though the Nasdaq has managed gains above 1%. Over the full third quarter, the S&P 500 and Nasdaq are each sitting on roughly 2% gains, while the Dow has shed close to 2%.