Futures Slip Amid Cautious Sentiment Ahead of Inflation Data

U.S. stock index futures edged lower on Wednesday as investors awaited pivotal economic reports, including a key inflation metric expected to shape the Federal Reserve's monetary policy outlook.

The Personal Consumption Expenditure (PCE) report, the Fed's preferred inflation gauge, is scheduled for release at 10 a.m. ET. Economists surveyed by Reuters anticipate an annual price increase of 2.3% for October, surpassing the previous month's 2.1% rise and the Fed's 2% target. Minutes from the Fed's recent meeting highlighted policymakers' uncertainty regarding the timing of rate cuts and the economic impact of current interest rates.

Market participants, using CME Group's FedWatch Tool, assign a 66.3% probability of a 25-basis-point rate cut in December. They also predict approximately 75 basis points in total rate reductions by the end of 2025, down significantly from September’s projection of 250 basis points, according to LSEG data.

Concerns persist over potential inflationary pressures from President-elect Donald Trump's proposed tax cuts and tariffs, which could trigger a global trade slowdown. Deutsche Bank estimates these tariffs could push U.S. core PCE inflation for 2025 from 2.6% to 3.7%, compared to pre-election expectations of 2.3%.

As of 5:37 a.m. ET, Dow E-minis fell 34 points (0.08%), S&P 500 E-minis dropped 10 points (0.17%), and Nasdaq 100 E-minis declined 68.25 points (0.33%). Meanwhile, futures for small-cap stocks gained 0.4%. Equities remain strong this year, with major Wall Street indices, including the small-cap Russell 2000, trading near record highs. The S&P 500 is poised for its largest one-month gain in a year, marking its sixth advance in seven months as markets price in the economic benefits of Trump's proposed policies.

Investors will also closely watch the second estimate of Q3 GDP, weekly jobless claims, and October’s durable goods data, all set to release at 8:30 a.m. ET.

Globally, markets are on edge as China's state media warns that Trump’s tariff policies could spark a damaging trade war between the world's two largest economies.

In corporate news, Dell (DELL.N) fell 12.7% after issuing a weak revenue forecast, while HP (HPQ.N) dropped 9% following a lackluster profit outlook. The sentiment spilled over to other tech stocks: Nvidia (NVDA.O) fell 1.3%, Microsoft (MSFT.O) slipped 0.6%, and Apple (AAPL.O) declined 0.3%. Workday (WDAY.O) lost 10% after forecasting below-expectation subscription revenue amid softer client demand.