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Stock futures drift ahead of inflation data

US stock futures opened flat Tuesday evening, as investors looked ahead to a key report on the state of inflation in the US to help clarify the path forward for monetary policy.

A key datapoint due for release Wednesday morning will be the Labor Department’s April Consumer Price Index (CPI), offering an update on price increases across the US economy. Economists expect the report will show some deceleration in inflation rates and confirm that March was the peak for price gains this year.

However, consensus economists are still looking for an 8.1% year-over-year rise in headline inflation, which would still be close to March’s more than 40-year high of 8.5%. And much of that deceleration will likely come as a result of a moderation in the typically volatile energy category, as energy prices have eased somewhat after spiking immediately following Russia’s invasion of Ukraine in late February.

The latest inflation data will help to inform how far the Federal Reserve will have to go on raising interest rates and tightening monetary policies in order to rein in rising prices. Uncertainty about the Fed’s next moves — and about whether these moves will bring down inflation while avoiding triggering a recession — has stirred up heightened volatility across risk assets, bringing the S&P 500 down by nearly 17% from its recent record high since Jan. 3. Stocks briefly turned lower Tuesday afternoon after Cleveland Fed President Loretta Mester said she saw the case for raising interest rates by 50 basis points at the next two Fed meetings, while leaving the door open to a potentially even larger 75 basis point rate hike.

“We’re going to see more volatility. This is not going to be an easy path forward as we still have a lot of unknowns,” Omar Aguilar, Schwab asset management CEO and chief investment officer, told Yahoo Finance Live on Tuesday. “There’s still a lot of uncertainty in many parts, not just in the macroeconomic and the economic structure, but also just geopolitically, things that haven’t been resolved, like the war in Ukraine as well as just the COVID situation in China.”

Others also suggested investors should brace for more near-term volatility.

“We finally started to see some signs of panic in the past week or so, obviously late last week and Monday,” Scott Brown, LPL Financial technical market strategist, told Yahoo Finance Live on Tuesday. “But we’re a little bit skeptical that we’re actually at the bottom. It doesn’t mean we have to go down a lot further. But a lot of things we look at, whether it’s put-to-call ratios really being extreme, the VIX spiking above 40 … They aren’t really as extreme as we typically would see in a correction, bottom, of this magnitude.”

6:15 p.m. ET Tuesday: Stock futures steady ahead of CPI data

Here’s where markets were trading Tuesday evening:

  • S&P 500 futures (EN=F): -6 points (-0.15%) to 3,990.75

  • Dow futures (YM=F): -44 points (-0.14%) to 32,043.00

  • Nasdaq futures (NQ=F): -21 points (-0.17%) to 12,328.00

NEW YORK, NEW YORK - MAY 05: Traders work the floor of the New York Stock Exchange during morning trading on May 05, 2022 in New York City.  Stocks opened lower this morning after closing high on Wednesday after the Federal Reserve announced an interest-rate hike by half a percentage point in an effort to further lower inflation.  (Photo by Michael M. Santiago/Getty Images)

NEW YORK, NEW YORK – MAY 05: Traders work the floor of the New York Stock Exchange during morning trading on May 05, 2022 in New York City. Stocks opened lower this morning after closing high on Wednesday after the Federal Reserve announced an interest-rate hike by half a percentage point in an effort to further lower inflation. (Photo by Michael M. Santiago/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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