Stock market today: futures dip ahead of key January inflation report

• Investors traded warily on Tuesday ahead of the release of January inflation data.
• Wall Street expects the Consumer Price Index to drop below 3% for the first time in over two years.

There was a wary mood in markets on Tuesday, as investors waited anxiously for the release of US inflation data for January.

US stock futures were in the red shortly after 5 a.m. ET. Dow Jones Industrial Average futures dipped by 0.2%, S&P 500 futures fell 0.3%, and Nasdaq 100 futures were down 0.4%.

The 10-year Treasury yield was virtually unmoved at 4.18%, and the US dollar index was up about 0.1%.

Wall Street expects the Consumer Price Index (CPI) to come in at 2.9%, marking its first sub-3% reading since March 2021.

The pace of annualized price growth moving closer to the Federal Reserve's 2% target could pave the way for the US central bank to cut interest rates within months, easing pressure on the economy and reducing the risk of a recession.

The Fed raised its benchmark rate from nearly zero to more than 5% in under 18 months to clamp down on inflation, which spiked as high as 9.1% — a 40-year high — in the summer of 2022.

"Headline inflation in the US is expected to fall below 3% in January," Ipek Ozkardeskaya, a senior analyst at Swissquote bank, said in a morning note.

"A softer-than-expected set of data will likely boost the May rate cut expectation, keep the dollar index below the 100-day moving average and support equities," she continued. "An unwanted upward surprise, however, should further hammer the May cut expectations and shift focus to June."

Several high-profile companies are due to release fourth-quarter earnings reports today, including Airbnb, Shopify, and Coca-Cola.

Investors have more data releases to look forward to this week. Initial jobless claims, retail sales, and the Empire State Manufacturing Survey are all scheduled for Thursday.