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S&P 500 and Dow futures fall as investors digest new inflation data

U.S. stock futures fell on Wednesday as investors digested an inflation report that showed consumer price increases eased slightly in August and analyzed the first presidential debate between Donald Trump and Kamala Harris.

Futures on the S&P 500 (ES=F) and the tech-heavy Nasdaq 100 (NQ=F) fell about 0.4 percent after both had a winning day. Futures on the Dow Jones Industrial Average (YM=F) fell about 0.6 percent, leaving the blue-chip index with a second day of losses.

Investors had been hoping for the August consumer price index to ease uncertainty about the extent of the Federal Reserve's first rate cut in years. Data from the August consumer price index showed that “core” prices, which strip out the more volatile costs of food and gasoline, rose 0.3 percent from the previous month, above the 0.2 percent economists had expected.

Following a mixed monthly jobs report, the price data should help settle the debate over whether to expect a 0.5% or 0.25% cut in interest rates at the Fed's decision next week. And following a larger-than-expected month-on-month rise in core inflation, traders now favor a smaller rate cut from the Fed at its meeting next week.

Read more: Fed forecasts for 2024: What experts say about the possibility of a rate cut

Following the release of Wednesday's consumer price index, the probability that the Fed would cut interest rates by 50 basis points was just 15%, according to the CME FedWatch tool, compared to 44% the week before.

Stock prices fluctuated as the market vacillated between hopes for a deeper rate cut and fears about the potential impact of one on a recession.

Meanwhile, investors watched Tuesday night's presidential debate between Trump and Harris to learn more about the candidates' plans for the economy. Their exchange was seen as lacking in detail on issues that could affect markets, such as tariffs, taxes and regulation.

Crypto-linked stocks fell in premarket trading as bets on a Harris victory for the Democrats rose after the debate. Leading token Bitcoin (BTC-USD) also declined amid her Republican rival's pro-crypto stance.

Elsewhere, GameStop (GME) shares fell 10% after the video game retailer reported a decline in quarterly sales and said it plans to issue 20 million new shares.

Live1 Update

  • Inflation: Consumer price increases fell slightly in August, investors expect interest rate cut in September

    A closely watched report on U.S. inflation showed that consumer price increases declined slightly year-on-year in August, according to the latest data from the Bureau of Labor Statistics released Wednesday morning.

    The consumer price index (CPI) rose 2.5% year-on-year in August, slowing from the 2.9% annual price increase in July. The annual increase was also in line with economists' expectations.

    The index rose 0.2 percent month-on-month, in line with both the monthly increase in July and economists' expectations.

    On a “core” basis, which excludes the more volatile costs of food and gasoline, prices rose 0.3% month-on-month and 3.2% year-on-year in August. On an annual basis, core prices rose 0.2% month-on-month and 3.2% year-on-year in July.

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