Stocks were higher and government bond yields were little changed on Tuesday morning, as investors braced for more unwelcome signs that inflation remains stubborn.
Futures on the S&P 500, which give investors the ability to bet on the index ahead of the market open, rose slightly on Tuesday morning. The index has been treading water so far this month, with wary investors cautiously assessing the outlook for the economy.
Crucial to investors’ assessments is the pace of inflation and whether the Federal Reserve will need to raise interest rates even more to temper rising prices.
Tuesday’s data is expected to show that “progress in lowering inflation remains painfully slow,” according to analysts at Wells Fargo, and in turn it is “likely to keep the Fed in a tough spot” as the central bank attempts to balance slowing the economy without tipping it into a more severe downturn.
Higher interest rates have already begun to eat into corporate profitability, with further increases likely to weigh on the stock market, according to strategists at Citibank, “particularly against a backdrop of rising recession concerns.”
Prices in interest rate futures markets, which allow investors to bet on where interest rates are going, show expectations already tilting toward the Fed making a quarter-point increase in May.
Ahead of the latest inflation data, the two-year Treasury yield, which is sensitive to interest rate expectations, edged up to 4.06 percent — it was about 3.8 percent a week ago.
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