Stock futures traded higher on Wednesday after another high inflation reading sent major averages tumbling to their worst day since June 2020 and dampened investor expectations of a less hawkish Federal Reserve. .
Futures linked to the Dow Industrial Average last rose 86 points, or 0.3%, while S&P 500 futures rose 0.3% and Nasdaq 100 futures gained 0. .3%.
The Dow sank more than 1,200 points on Tuesday, or almost 4%, while the S&P 500 lost 4.3%. The Nasdaq Composite fell 5.2%.
The market moves came after August’s Consumer Price Index report showed headline inflation rose 0.1% on a monthly basis despite lower gasoline prices.
The hot inflation report left questions over whether stocks could return to their June lows or fall even further. It also sparked some fears that the Federal Reserve could potentially hike even more than the 75 basis points the markets are pricing.
“It caught the market off guard,” said Quincy Krosby of LPL Financial. “The market expected us to at least stabilize – maybe not down, but definitely not up. That was the wrong direction and worry, of course, always translates into what that means for the Fed.”
All 30 Dow Jones stocks and S&P 500 sectors ended the session lower, dragged lower by communications services. The sector fell 5.6% and ended its worst day since February, led by shares of big tech names like Netflix and Meta Platforms, which fell around 7.8% and 9.4%, respectively.
A reading of the producer price index is due out Wednesday morning and could offer further clues on the state of inflation ahead of the Fed’s rate hike meeting next week.