Futures rise with inflation data, earnings in view

By Lisa Pauline Mattackal and Pranav Kashyap

(Reuters) -U.S. stock index futures bounced back on Tuesday from a selloff in the previous session, as investors turned their focus on key inflation data and third-quarter earnings later this week for fresh insights into the Federal Reserve’s interest rate path.

All three major indexes closed down around 1% on Monday, as a jump in Treasury yields, concerns about the impact of rising conflict in the Middle East and a repricing of U.S. rate expectation pressured equities.

U.S. E-minis were up 22.75 points, or 0.4%, E-minis were up 88 points, or 0.44%, Dow E-minis were up 61 points, or 0.14%.

U.S. Treasury yields retreated slightly from Monday’s highs, though the yield on the benchmark 10-year note remained above 4% as strong economic data last week prompted investors to trim bets on the scope of the Federal Reserve interest rate cuts over the rest of this year.

Traders have priced in a nearly 89% chance of a 25 basis point interest rate cut from the Fed at its November meeting. Bets on no rate change at the meeting also crept up slightly, according to CME FedWatch.

“We did see strong sell off yesterday so it’s not unnatural to see a slight bounce, particularly as there’s a vacuum of fresh data today,” Fiona Cincotta, senior market analyst at City Index said.

“We’re in a lull ahead of the busy end of the week. If we do get a hotter-than-expected inflation read, that might unnerve the markets quite quickly”.

The , Wall Street’s “fear gauge,” retreated from Monday’s highs but was still trading around one-month high at 22.04

Meanwhile, PepsiCo (NASDAQ:) lost about 1% after the packaged food giant posted a surprise drop in third-quarter revenue and cut its forecast for annual sales growth.

The S&P 500 is expected to report a 3.2% year-over-year earnings per share (EPS) rise in the third quarter, “with gains for six of its 11 sectors,” said Sam Stovall, chief investment strategist at CFRA Research.

Fed Governor Adriana Kugler said earlier on Tuesday she supported further interest rate cuts if inflation continues to ease, as she expects.

Some Fed officials, including John Williams and Alberto Musalem, had said on Monday that it would be appropriate to reduce rates over time.

A number of other Fed officials are expected to speak later in the day, including Raphael Bostic, Susan Collins and Philip Jefferson.

International trade balance data for August is also due later on Tuesday.

Investors were also watching out for the impacts of category 4 Hurricane Milton on the markets.

Among single stocks, shares of Honeywell International (NASDAQ:) rose 2.3% after a report that the company is planning to spin off its advanced materials business.

U.S.-listed shares of Chinese companies slid, tracking losses in domestic stocks, as optimism over China’s stimulus measures waned due to the absence of more specific details.

Shares of Alibaba (NYSE:) Group, JD (NASDAQ:).com and PDD Holdings slumped between 7.4% and 10.2%.