S&P 500 Forecast: SPX falls after hotter CPI data

US futures

Dow future -1.04% at 44127

S&P futures -0.79% at 6022

Nasdaq futures -0.64% at 21559

In Europe

FTSE -0.02% at 8780

Dax  0.22% at 22.07

• US CPI rose 3% YoY, up from 2.9%
• The market lower Fed rate cut expectations to one 25pbs
• Powell will testify again before Congress
• Oil falls after US inventories rise

Hot CPI dampens rate cut expectations

US stocks are set to open sharply lower after US inflation came in hotter than expected, pushing back Fed rate cut expectations.

US CPI rose 3% year on year in January, above expectations that it would have matched the December pace of 2.9%. The monthly gauge showed an unexpected acceleration to 0.5%, up from 0.4% in January and well ahead of economists expectations of 0.3%.

The core inflation value, which excludes more volatile items such as food and fuel, rose 3.3% year over year, up from 3.2% in December and defying expectations of a fall to 3.1%.

The right data is the latest indication that this inflation process has stalled at a level above the Federal Reserve's 2% target. The data supports the view that the Federal Reserve will not be cutting interest rates in the first half of this year and signals a wait-and-see attitude to further monetary policy easing.

The data came after Federal Reserve Jerome Powell told a congressional committee yesterday that above-target inflation and the strong U.S. economy were reasons for the Fed to leave interest rates unchanged in January and why policymakers are in no rush to cut rates further.

With inflation sticky and the US economy strong, Trump's tax cuts and trade tariffs policies could prove more of a headache for the Fed looking to cut rates. The market now sees one 25 bps rate cut by December, and not fully priced in.

Fed chair Jerome Powell is due to speak again later today and provides an opportunity to hear the Fed’s real-time reaction to the data.

Corporate news

Lyft is slumping by almost 14% premarket after the ride-hailing company warned that lower pricing trends from last year are expected to continue into 2025. This is in contrast to Uber, which said last week that it expects prices for its affordable private car offering to be marginally up.

Super Micro Computer has jumped over 10% despite cutting its fiscal 2025 full-year revenue forecast. The server builder is expected to generate revenue of $23.5 billion to $25 billion for the current quarter, while analysts had been expecting $24.92 billion.

CVS is set to open over 8% higher after the pharmacy posted Q4 earnings that beat expectations. The company posted EPS of $1.19 on revenue of $97.71 billion ahead of the $0.93 and revenue of $97.19 billion forecast.

S&P 500 forecast – technical analysis.

The S&P 500 is once again testing the 50 SMA. Should the support continue to hold, buyers will look to rise towards 6100 and 6130 to fresh record highs. Should sellers take out the dynamic support, the price could test 5915, the February low and the 100 SMA. A break below here could see sellers gain momentum.

FX markets – USD rises, GBP/USD falls

USD is rising after the hotter inflation data, which means that a Fed rate cut is less likely in the first half of this year. Powell’s testimony will be watched closely.

EUR/USD is falling following the US inflation data reversing earlier gains. The EUR is also under pressure after European Commission president Ursula von der leyen has threatened to take countermeasures against trump's 25% levy on steel and aluminium exports.

GBP/USD is falling amid a stronger U.S. dollar and the growing divergence between the Fed and the BoE. The BoE cut rates by 25 basis points last week and is expected to cut rates three times this year, compared to the Fed, which may struggle to cut rates at all.

Oil falls after inventories rise

Oil prices are falling after higher than expected oil inventories and after US inflation came in hotter than expected, dampening the likelihood of more rate cuts anytime soon and

According to API data, US crude oil stockpiles rose by 9.4 million barrels in the week ending February 7th, while gasoline inventories fell by 2.5 million barrels. Data from the EIA will be released later today.

The EIA also raised its estimate for US crude oil production whilst leaving its demand forecasts unchanged. It now expects the US crude production to average 13.59 million barrels a day in 2025, up from its previously expected 13.55 million barrels today.

Meanwhile, hot inflation means a Fed rate cut is less likely. Higher rates for longer could keep the breaks on growth dampening the oil demand outlook.