Dow futures were trading in red before the opening bell on Tuesday as the investor focus shifts to July’s consumer price index, due later today, which could mark the first uptick in core inflation in six months.
The release will be a key test for the Federal Reserve. Many traders still expect a rate cut in September, but a hotter inflation number could make the central bank think twice.
Some relief is also coming from the US decision to extend certain tariffs on Chinese goods, easing immediate trade worries. For now, the market is waiting to see whether the inflation data reinforces the case for looser policy or forces a rethink.
5 things to know before Wall Street opens today
1. July’s Consumer Price Index lands today, with economists looking for a 2.8% annual inflation rate, just above June’s 2.7%.
Core inflation, which strips out food and energy, is expected to hit 3.0%, the highest since January. On a month-to-month basis, CPI is seen rising 0.2%, with core CPI at 0.3%.
The pickup is partly being tied to tariff-driven price bumps in categories like furniture, clothing, and recreational goods.
2. President Trump’s tariffs are still working their way through the economy, and July’s inflation numbers are expected to show it.
Prices for household furnishings, auto parts, clothing, and recreational goods, all heavily dependent on imports, have been climbing as duties push up costs.
For shoppers, that means paying more at the register; for the Federal Reserve, it means inflation that could prove harder to bring down.
If these tariff-related pressures stick around, they could influence the Fed’s timing on interest rate moves, potentially delaying the rate cuts many on Wall Street have been expecting.
3. With inflation data sending mixed messages and trade tensions still simmering, the market feels cautious but not panicked.
Traders are watching to see which sectors can hold up if costs keep creeping higher; staples and utilities have been steady, while some growth names are looking vulnerable.
A few desks are lightening up on risk until earnings and the next round of economic numbers land.
If companies post solid results, we could see money rotate back into cyclicals; if not, expect a drift toward defensive names and a tighter stance until the macro picture clears.
4. Even with inflation running hot in several areas, there’s likely to be a bit of breathing room this month from falling gas prices and softer new car costs.
The catch? Used car prices and airline fares are still heading higher, which muddles the picture.
For traders and policymakers alike, these crosscurrents in transportation and energy will be part of the puzzle when sizing up the true direction of inflation.
5. On the calendar today are several closely watched Treasury auctions, including the 6-month, 4-week, and 8-week bills. These sales play a big role in setting short-term borrowing costs and shaping liquidity in the system.
When demand comes in strong, it’s often read as a sign that investors are comfortable parking money in US government debt, which can ripple across the yield curve.
With economic uncertainty and fresh inflation numbers hitting on the same day, traders will be paying close attention to how the bids come in, not just for what it says about fixed-income markets, but also about the broader appetite for risk.
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