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U.S. STOCK FUTURES SURGE, YIELDS SLIDE, AFTER BROADLY IN-LINE CPI

The main U.S. equity index futures are jumping after the release of the latest data on U.S. consumer prices. E-mini S&P 500 futures EScv1 are now up around 1.5% vs a gain of about 0.4% just before the numbers came out.

The December headline CPI reading on a month-over-month basis was hotter than the LSEG estimate. The year-over-year print was in-line with the Reuters Poll. The month-over-month core reading was in-line with the estimate. The year-over-year core print was cooler than the Reuters Poll:

In terms of other data on Wednesday, the mortgage market index came in at 224.4 vs 168.4 last week. The January NY Fed manufacturing index came in at -12.6 vs a +3.0 estimate.

According to the CME's FedWatch Tool, the probability that the FOMC sits on its hands and leaves rates unchanged at its January 28-29 FOMC meeting is unchanged at 97%. There is around an 3% chance the Fed cuts rates by 25 basis points.

Looking further into 2025, the market has now shifted its bias forward to June, from July, for rates to be in the 4.00%-4.25% area vs the current target rate of 4.25%-4.50%. Rates are then expected to flat line into year end.

The U.S. 10-Year Treasury yield US10YT=RR is now around 4.68% vs 4.76% just before the data was released. The yield ended at 4.788% on Tuesday.

All S&P 500 sector SPDR ETFs are higher ahead of the open with financials XLF.P, up about 2.4%, posting the biggest rise.

And in the wake of the unofficial kickoff to Q4 earnings season, with the release of some big bank earnings, including reports from JP Morgan JPM.N, Wells Fargo WFC.N and Goldman Sachs GS.N, the Invesco KBW bank ETF KBWB.O is up around 4.5%. The KBW regional banking ETF KRE.P is up around 3.4%.

Regarding the data, Tina Adatia, head of fixed income client portfolio management at Goldman Sachs Asset Management, said

“After recent red-hot data, today’s softer than expected core CPI reading should help cool fears of a reacceleration in inflation."

Adatia added "While today’s release is likely insufficient to put a January rate cut back on the table, it strengthens the case that the Fed’s cutting cycle has not yet run its course."

Here is a premarket snapshot from around 0850 EST:

(Terence Gabriel, Karen Brettell)

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FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:

BANK OF JAPAN HIKE IN PLAY NEXT WEEK - CLICK HERE

HEALTHCARE STANDS OUT AS US EARNINGS POTENTIAL TO BROADEN - SAXO - CLICK HERE

UK CPI: JUST WHAT THE DOCTOR ORDERED - CLICK HERE

UK STOCKS OUTSHINE IN EUROPE AS INFLATION SLOWS - CLICK HERE

EUROPE BEFORE THE BELL: FTSE FUTURES OUTPERFORM ON SOFT INFLATION DATA - CLICK HERE

INFLATION DUO TAKES CENTRE STAGE - CLICK HERE