Futures edge lower ahead of inflation test; Delta Airlines falls By Reuters

By Lisa Pauline Mattackal and Ankika Biswas

(Reuters) -U.S. index futures slipped on Thursday on expectations that a key inflation print could shape rate-cuts bets and put Wall Street’s record-breaking run to the test, while Delta Air Lines (NYSE:) slumped after a weak forecast, dragging other airline stocks.

All eyes are now on the Consumer Price Index to see if the numbers will indicate that inflation is on a downward trend. Economists polled by Reuters forecast that CPI slowed to 3.1% annually in June, from 3.3% in May, with core inflation expected to remain steady at 3.4%.

The notched its sixth consecutive record close and the Nasdaq its seventh on Wednesday, boosted by megacap and semiconductor stocks. Federal Reserve Chair Jerome Powell lifted expectations for policy easing in September, but reiterated that such a decision would depend on data.

“Inflation in May surprised on the downside, we expect today’s numbers to pull in the lower direction, thereby supporting our forecast of two Fed cuts in the second half of the year,” analysts at SEB Research said in a note.

“Powell said he wanted to see ‘more good numbers’ before it is possible to cut interest rates. Hopefully, he will get some of them today.”

Among headlining stocks, Delta Air Lines slumped 9.7% in premarket trading after forecasting lower-than-expected profits in the current quarter, with the carrier citing discounting pressure on the lower end of the market.

United Airlines Holdings (NASDAQ:), American Airlines (NASDAQ:) Group, Spirit Airlines (NYSE:), Alaska Air (NYSE:) Group and JetBlue Airways (NASDAQ:) all lost between 2.1% and 4%.

In mixed range-bound trading for megacaps, AI-chip favorite Nvidia (NASDAQ:) edged up 0.6% after closing at a three-week high on Wednesday.

Investors will monitor weekly jobless claims data later in the day, along with the Producer Price Inflation report on Friday for clues on the U.S. monetary policy outlook.

Traders are pricing in a 68% chance of a 25-basis-point rate cut by September. That probability has hovered around 70% for the past week, but is up significantly from under 50% a month ago, according to CME’s FedWatch.

Hopes for interest rates to be lowered, continued economic resilience and exuberance around artificial intelligence-linked stocks has kept Wall Street’s main indexes at or near record highs this year.

Another key test for the rally is the second-quarter corporate earnings season, with all eyes on big banks, which are scheduled to report on Friday.

At 7:03 a.m. ET, were down 54 points, or 0.13%, were down 6.25 points, or 0.11%, and were down 17.75 points, or 0.08%.

Other single movers included PepsiCo (NASDAQ:), which shed 2% after the soda and snacks maker missed expectations for second-quarter revenue.

Citigroup slipped 1.3% after U.S. bank regulators fined the lender $136 million for making “insufficient progress” in fixing the data management issues identified in 2020.

Pfizer (NYSE:) rose 3.6% following the drugmaker’s plans to conduct studies in the second half of 2024 on a reworked, once-a-day version of its experimental obesity pill, danuglipron.

Alcoa (NYSE:) rose 2.4% after the aluminum producer’s preliminary second-quarter results beat estimates.