Stock futures showed a modest increase Friday as traders awaited the crucial August Consumer Price Index (CPI) report. This inflation data will be a key factor in the Federal Reserve’s upcoming decision on interest rates. Meanwhile, oil prices surged amid escalating Middle East tensions, and bond yields continued to rise.
U.S. stock futures saw a modest uptick in early trading on Friday, as investors braced for the release of the August Consumer Price Index (CPI) report, a key indicator that will heavily influence the Federal Reserve's upcoming interest rate decision.
S&P 500 futures climbed 0.19%, while futures for the Dow Jones Industrial Average showed a gain of 151 points. Nasdaq 100 futures edged up by less than 0.1%.
This cautious optimism comes after a challenging Thursday for the major averages. The Dow fell over 300 points (0.6%), the S&P 500 lost 0.6%, and the Nasdaq Composite slipped 0.7%. This marked the fourth consecutive losing day for all three indices.
Year-to-date, the Dow is on track for a 2.5% decline, with the S&P 500 and Nasdaq both heading for a 1.6% slide.
Global Markets React to Inflation and Geopolitical Tensions
Asian markets experienced declines, with South Korea's Kospi index down 2.8%, Japan's Nikkei 225 losing 2.6%, and Hong Kong's Hang Seng Index falling 1.4%. Mainland China's CSI 300 was down 0.9%, and Australia's S&P/ASX 200 shed 1%.
Thursday's market downturn was exacerbated by a surge in oil prices. West Texas Intermediate (WTI) crude futures surpassed $100 per barrel, reaching their highest settlement price since May 2026, amid escalating conflict between the U.S. and Iran.
Bond yields also climbed, with the 10-year Treasury note yield topping 4.95%, its highest level since October 2023.
Focus on the August CPI Report
Traders are now keenly awaiting the August Consumer Price Index (CPI) report, due Friday. Economists surveyed by Dow Jones anticipate a 0.4% monthly increase and a 3.4% annual rate. This report is critical as it will factor into the Federal Reserve's September 16 decision on interest rates.
Fed funds futures indicate a roughly 71% probability of a rate hike, according to CME Group's FedWatch tool. Christopher Hodge, chief economist at Natixis CIB Americas, noted, "A reading in line with consensus would represent the fourth consecutive month of encouraging inflation readings and ease pressure for a hike by the Fed in September." He added, "If inflation comes in hotter than consensus, we expect a hike at next week's meeting."
UK Economy Shows Resilience
In separate economic news, the U.K. economy grew by 1.6% in the year to July, surpassing expectations. Preliminary data revealed a 0.4% monthly GDP growth, also exceeding forecasts and following a 0.3% rise in June. The services sector was the primary driver of this growth.
Yields Climb, Oil Prices Surge
The 10-year Treasury yield continued its ascent, nearing 5% as selling pressure persisted in the bond market. Investors are contending with inflation risks, substantial supply, and the anticipated Federal Reserve policy actions. The 30-year yield also edged higher. Analysts at BMO Capital Markets highlighted that the current sell-off is influenced by heavy corporate issuance, strong employment data, and fiscal concerns.
Oil prices extended their gains, with Brent crude futures for November delivery rising to $108.21 a barrel and WTI futures reaching $102.96 per barrel. Heightened geopolitical tensions in the Middle East, including reports of naval incidents in the Strait of Hormuz and attacks on vessels off the coast of Oman, contributed to supply disruption worries.
Chinese AI Chipmaker Soars on Debut
Meanwhile, Chinese AI chipmaker Enflame saw its shares surge 206% on its Shanghai debut, reflecting strong demand for domestic alternatives to U.S. technology giants like Nvidia. The company, backed by Tencent, is part of China's growing AI chip sector.
US Tightens Sanctions on Iran
U.S. Treasury Secretary Scott Bessent announced that a large bank will be sanctioned on Monday, September 11, in an effort to increase economic pressure on Iran. This move follows previous sanctions targeting financial institutions believed to be facilitating funds for Iran.
-- Reporting by Chloe Taylor, Lee Ying Shan, Justina Lee, Kai Nicol-Schwarz, Jenny Lee, Evelyn Cheng, and Ananya Chetia.
