US Stock Futures Slide On Inflation Fears: Analyst Sees Risk-Off Mood As Debt-Ceiling Crisis Looms

U.S. index futures pointed to a weaker open on Tuesday after resilient stocks averted profit-taking related sell-off in the previous session. Earnings news flow bordered on the negative and traders also look ahead to the Federal Reserve speeches scheduled for the day even as they remain apprehensive about the April inflation data and the debt ceiling impasse.

Cues From Monday's Trading

The major averages went about a consolidation move on Monday, as traders preferred to stay on the sidelines ahead of Wednesday's inflation data. Some disappointing earnings and deterioration of sentiment toward regional bank stocks over the course of the day also served to keep sentiment subdued.

The S&P 500 Index moved mostly sideways during the session, while the tech-heavy Nasdaq Composite Index traded lower in the morning session before turning higher for the day. The 30-stock Dow Industrials languished below the unchanged line for the bulk of the session and ended lower.

Most sectors experienced modest selling pressure, while communication services stocks rallied, helping to offset some of the negativity. DISH Network Corp. DISH, Walt Disney Co. DIS, Warner Bros. Discovery, Inc. WBD and Alphabet, Inc. GOOGL GOOG led the sector's advances.

U.S. Indices’ Performance Wednesday

Analyst Color:

As the debt-ceiling impasse continues, investors may be well advised to be selective in their investment strategy, said Adam Turnquist, chief technical strategist at LPL Financial.

" While we view a default as a very low probability event, headline risk over the next few weeks could weigh on risk sentiment," the analyst said.

"In the event of a prolonged debt ceiling battle similar to 2011, watch for large caps to outperform small caps, growth to outperform value, and defensive sectors to outperform more cyclical sectors," he added.

Futures Performance On Tuesday

In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust SPY fell 0.34% to $411.35 and the Invesco QQQ ETF QQQ declined 0.40% at $322.39, according to Benzinga Pro data.

Upcoming Economic Data:

Fed Governor Philip Jefferson is scheduled to speak at 8:30 a.m. EDT.

The results of the IBD/TIPP economic optimism survey for May are due at 10 a.m. EDT. The headline economic optimism index is expected to improve from 47.4 in April to 48.4, with the April reading marking the highest in 16 months.

The Energy Information Administration is due to release its short-term energy outlook report at 12 p.m. EDT.

New York Federal President John Williams, a Federal Open Market Committee member, will make a public appearance at 12:05 p.m. EDT.

The Treasury will auction three-year notes at 1 p.m. EDT.

See also: How To Trade Futures

Stocks In Focus:

• Palantir Technologies Inc. PLTR rallied nearly 20% in premarket trading after it reported an unexpected profit for the first quarter and slightly upped its guidance for the fiscal year.
• PayPal Holdings, Inc. PYPL, Skyworks Solutions, Inc. SWKS and Lucid Group, Inc. LCID all moved to the downside following their quarterly results.
• Regional bank stocks fell, led by PacWest Bancorp. PACW, Western Alliance Bancorp. WAL, First Horizon Corp. FHN,  East West Bancorp. EWBC and Comerica, Inc. CMA.
• Elanco Animal Health, Inc. ELAN, Fisker, Inc. FSR, Fox Corp. FOXA, EVgo, Inc. EVGO, Nikola Corp. NKLA, Under Armour, Inc. UA, Warner Music Group Corp. WMG and Novavax, Inc. NVAX are among the companies reporting results before the market open.
Those reporting after the close include Affirm Holdings, Inc. AFRM, Airbnb, Inc. ABNB, Akamai Technologies, Inc. AKAM, IAC, Inc. IAC, Electronic Arts, Inc. EA, Occidental Petroleum Corp. OXY, Rivian Automotive, Inc. RIVN, Twilio, Inc. TWLO, Plug Power, Inc. PLUG and Wynn Resorts, Inc. WYNN.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures were reversing course on Tuesday after rising 2.44% on Monday. The WTI-grade crude oil traded 0.86% lower at $72.53 a barrel, adding on to their 4.05% gain on Friday. The yield on the benchmark 10-year Treasury note fell 0.037 percentage points to 3.482%.

Asian markets are mostly lower ahead of the U.S. inflation data and weak import data released by China. The Japanese market bucked the downtrend and advanced solidly. European stocks traded modestly to moderately lower in late-morning trading.

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