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S&P 500 FUTURES SLIGHTLY GREEN AFTER COOL CPI

E-mini S&P 500 futures ESc1 have turned positive after the release of the latest Consumer Price Index (CPI) data. The futures are now up around 0.2% versus a loss of around 0.1% shortly before the numbers came out. The futures were lower as investors sifted through earnings reports from Wall Street's biggest banks, while IBM IBM.N shares collapsed after a dismal revenue forecast.

June CPI on a month-over-month basis came in at -0.4% vs. a -0.1% estimate. The year-over-year print was 3.5% as compared to the 3.8% Reuters Poll. The core CPI on a month-over-month basis came in at 0.0% vs. a 0.2% estimate. On a year-over-year basis, the core reading came in at 2.6% vs. the 2.8% Reuters Poll.

Separately, June NFIB Business Optimism came out at 97.4 vs. 95.3 last month.

According to the CME's FedWatch Tool, the probability that the Fed leaves its current target rate of 3.50% to 3.75% unchanged at its July 28 to 29 FOMC meeting is now 83% vs. 63% just prior to the release of the data. The chance that the FOMC hikes rates by 25 basis points (bps) is now 17% from 37%.

Looking further out into 2026, interest rate probabilities based on Fed funds futures are now pricing in about 33 bps of hikes through year-end vs. about 40 bps shortly before the numbers were released.

The U.S. 10-Year Treasury Yield US10YT=RR is now around 4.57%. It was around 4.61% just before the numbers came out. The yield ended Monday at 4.61%.

S&P 500 sector SPDR ETFs are mixed in premarket trading with financials XLF.P and healthcare XLV.P, both off about 0.5%, the weakest groups. Tech .XLK.P, up 1%, is the top gainer.

The Invesco KBW Bank ETF KBWB.O is up about 0.3%. The Invesco PHLX Semiconductor ETF SOXQ.O is advancing more than 4.5%.

Regarding the data, Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said:

"AI isn’t showing up much in CPI, yet. Information technology commodities prices fell 0.9% over the last month. Smartphone prices fell 0.8%. That could change with the July through September numbers as Apple and others announced price hikes are coming. Computer software and accessories prices are up 17.4% from a year ago, but that only makes up 0.03% of the consumer basket."

Jacobsen added, "The more important thing for consumer sentiment is that energy number. Regular unleaded gasoline prices were still up more than 27% from a year ago even with the 10% drop in prices in June."

"Headline CPI is hot, but it’s not rotten to the core."

Here is a premarket snapshot from around 8:50 a.m. ET.

(Terence Gabriel, Chuck Mikolajczak)

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