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Dow Futures, Nasdaq Move Higher After Soft February Inflation Reading

Tech stocks will likely be in focus Wednesday, following the Nasdaq's biggest single-day gain in four months, as investor eye inflation data and a key 10-year bond sale.

The Wednesday Market Minute

  • Global stocks grind higher following yesterday's tech-lead rally on Wall Street, but gains were capped by concerns for rising interest rates ahead of a key reading of February U.S. inflation
  • Benchmark 10-year Treasury bond yields fall to 1.545% ahead of a $38 billion auction later today following solid overall demand in yesterday's $58 billion sale of 3-year notes.
  • OECD boosts global and U.S. growth forecasts as vaccine rollouts accelerate, with GDP in the world's biggest economy pegged at 6.5% for 2021.
  • CDC data shows 93.7 million coronavirus vaccine doses have been administered as of yesterday, a pace of more than 2 million per day against a new case rate of around 50,000.
  • U.S. equity futures suggest a firmer open on Wall Street following softer-than-expected February CPI data and ahead of results from the 10-year bond auction at 1:00 pm Eastern time.

Wall Street futures moved higher Wednesday, with tech stocks extending gains following their biggest single-day rally in four months, following a key reading of consumer prices and ahead of an auction of 10-year Treasury bonds that could rekindle market concerns for faster inflation in a post-pandemic recovery.

Headline inflation for the month of February was estimated at 1.7%, while so-called core consumer prices rose by a less-than-expected 0.1% from the month of January. 

The Nasdaq's 4% surge on Tuesday soothed some of those worries as traders returned to beaten-down tech giants such as Tesla  (TSLA)  -- which had its best single-day gain in more than a year -- Apple  (AAPL) , Amazon  (AMZN)  and Microsoft  (MSFT)  amid an easing in government bond yields that enticed bargain-hunting investment funds.

Wednesday's focus, however, is likely to be more expansive, with investors keying on the Commerce Department's reading of February CPI at 8:30 am and then closely-eyeing the results of a sale of $38 billion in benchmark 10-year Treasury notes at 1:00 pm Eastern time. 

Both will provide markets with an indication of where near-term market interest rates -- and, by extension, U.S. stocks -- are headed over the near term, with any suggestion of weakening demand in the 10-year auction likely to trigger a spike in yields that could turn stocks lower later in the session.

The February CPI reading, however, could be the start of a series of data showing faster-than-expected consumer price increases, with further inflation signals coming from factory gate price rises in China (the fastest in two years) earlier today and the OECD's newly-released forecasts for the U.S. economy, which now include a 6.5% GDP growth estimate for the year.

And, of course, the likely final passage of President Joe Biden's $1.9 trillion coronavirus relief bill by Congress later today. 

With macro-economic benchmarks likely to dominate the day's trading, Wall Street futures were higher heading into the opening bell, as contracts tied to the Dow Jones Industrial Average indicate a gain of around 200 points.

Futures tied to the S&P 500, which is now up 3.2% for the year, are set for an 22 point gain while those linked to the Nasdaq Composite suggest a 165 point opening bell advance. 

General Electric  (GE)  shares were a notable pre-market mover, falling more than 2% after selling the majority of its aircraft leasing business to Ireland's AerCap for around $30 billion and unveiling plans for a 1-for-8 reverse stock split.

Benchmark 10-year note yields fell 1.5 basis points higher to 1.545% ahead of this afternoon's $38 billion auction, while the U.S. dollar index is trading around 0.1%  higher at 92.059 against a basket of its global peers.

In Europe, stocks bumped closer to their pre-pandemic highs as the euro eased against the dollar and the follow-on from last night's rally on Wall Street boosted tech stocks, while shares in Asia recorded modest gains following a mixed reading on consumer and producer prices in China that raised the prospect of exported inflation from the world's second-largest economy.

Oil prices were also trading in a tight overnight range ahead of the Energy Department's weekly data on domestic crude stocks at 10:30 am Eastern time, with WTI crude marked 23 cents higher at $64.22 per barrel and Brent rising 7 cents to $67.60 per barrel.