U.S. stock futures steady as traders eye looming inflation data and earnings

What’s driving markets

The S&P 500 sits less than 0.5% off its best level since mid-February as investors have become more relaxed about prospects for the U.S. economy and seemingly more accepting of the path of Federal Reserve policy.

The nonfarm payrolls report released at the end of last week showed a steady pace of job creation but with no great sign of accelerating wage inflation — news that helped calm fears of a sharp economic slowdown and faster Fed rate hikes.

“The U.S. payrolls have seemingly steadied the ship after the market got a bit out-of-step with—or at least over-extrapolating an imminent recession from the gloomy ISM index data last week,” said Stephen Innes, managing partner at SPI Asset Management.

Data from China on Tuesday showing consumer inflation dipped to its lowest level in more than a year in March, is also helping ease fears about price pressures.

But now attention will turn to the U.S. CPI report due Wednesday, and the minutes of the Fed’s recent policy meeting, too.

Then, on Friday, the first-quarter corporate earning seasons kicks into gear with the financial sector in the vanguard.

“The banks will be an early test of investors’ mettle on any number of fronts, not least of which will be the early fallout from the recent banking turmoil, as JP Morgan Chase, Wells Fargo and Citigroup open the season,” said Richard Hunter, head of markets at Interactive Investor.

“In particular, loan growth will be scrutinized and could prove to be tepid in view of tightening lending conditions, while there will also be a close eye on any increase in souring loans, given the slowing economy. In turn, this could lead banks to increase provisions for bad debts once more, with the additional pressures of a deal-making drought and trading volatility also potentially weighing on earnings,” Hunter added.

Bulls will be hoping a well-received earnings season can help push the S&P 500 through the top of the 3,800 to 4,200 range in which it has fluctuated for nearly six months.

“The recent stalling out in SPX doesn’t appear too serious and prices remain within striking distance of a possible breakout above 4200,” noted Mark Newton, head of technical strategy at Fundstrat.

“While a decline lower under 4039 might suggest some minor pullback is getting underway, it’s still difficult to make a strong bearish technical case. Trends from mid-March remain bullish while momentum is positively sloped while not overbought,” Newton added.

A trio of Fed officials are due to speak on Tuesday: Chicago Fed President Goolsbee at 1:30 p.m.; Philadelphia Fed President Harker at 6:30 p.m.; and Minneapolis Fed President Kashkari at 7:30 p.m. All times Eastern.