US stock futures struggle ahead of inflation data

The US stock futures are struggling for momentum on Tuesday as traders eschew chunky bets ahead of inflation data that may decide the fate of the recent summer rally.

On Monday, the Dow Jones Industrial Average DJIA increased 29 points, or 0.09%, to 32833, the S&P 500 SPX declined 5 points, or 0.12%, to 4140, and the Nasdaq Composite COMP dropped 13 points, or 0.1%, to 12644, while the Dow Jones Industrial Average rose 29 points, or 0.09%, to 32833. The Nasdaq Composite is up 18.8% from its 2022 low in mid-June, but is down 19.2% for the year to date.

Index futures are close to recent highs ahead of a consumer price index report by the U.S. consumer price index on Wednesday.

The S&P 500 bounced nearly 13% from its 2022 low in mid June due to hopes that inflation may have peaked and that the Federal ReserveFederal Reserve may adopt a less aggressive monetary tightening cycle.

A corporate second quarter reporting season that was not as bad as feared has underpinned sentiment in recent weeks.

On Monday a sales warning from the Nvidia NVDA has given bulls some pause for thought. Analysts warn the market's optimistic tone of late will be further challenged if the CPI report comes in hotter than expected.

This temporary calm could be changed tomorrow with the latest US CPI, so maybe the next 30 hours will be the calm before the storm or perhaps herald in the real beginning of the summer, according to analysts at Deutsche Bank.

Economists predict that a dip in energy prices will help headline year-on-year CPI for July fall from the multi-decade high of 9.1% to 8.7%.

The debate continues over whether the latest market advance is the beginning of a longer upward trend or a rally that will fail when faced with slower economic growth and higher interest rates.

Recent activity in Washington was not supportive, according to analysts at Mizuho. The Senate Democrats have struck a deal on a budget reconciliation bill that will increase taxes on corporations and increase spending on green energy, while also cutting the deficit, suggests that the markets need to take a tighter fiscal policy on top of the ongoing Fed tightening. Mizuho said that this is now the upper end of the trading range because of the recent rally as another bounce within a bear market that should run out of steam before 4200 on the broad market index.

Wells Fargo strategists warned that profit projections were too rosy. The Wells Fargo analysts said in a note to clients that we expect a slow growth in revenue growth and higher costs to squeeze margins in the coming quarters, which could lead to an earnings recession over the next 12 months.

Earnings reports are due to be released after the closing bell, according to Coinbase COIN and Roblox RBLX.

How are other assets faring?

The Asia markets were mostly softer, with Hong Kong HSI, down 0.2%, and Japan's Nikkei 225 NIK, off 0.9%. In Europe, the Stoxx 600 SXXP fell by 0.3%.