Stock market today: US futures shake off inflation surprise

• US stock futures rose on Wednesday as investors calmed down following an inflation surprise.
• Stocks slumped on Tuesday after headline inflation rose by a stubborn 3.1% in January.

The US stock market was poised to open higher on Wednesday as investors collected themselves after an inflation spoiler.

Nasdaq futures were up 0.5% shortly after 5 a.m. ET. S&P 500 futures rose 0.3%, and Dow Jones Industrial Average futures inched up 0.2%. All three indexes dropped by more than 1% on Tuesday, with the S&P retreating below the 5,000 point threshold it recently crossed for the first time.

The sell-off was sparked by the Consumer Price Index rising 3.1% in January on an annualized basis, ahead of Wall Street's consensus forecast of 2.9%.

Stubborn inflation might prompt the Federal Reserve to refrain from cutting interest rates anytime soon, which could weigh on riskier assets like stocks and raise the risk of a recession.

Wall Street now sees a sub-40% chance of a rate cut in May, down from more than 60% a day ago, the CME's FedWatch tool shows.

"The stubbornness of inflation means hopes for an early rate cut are fading fast and that led to a sell-off on Wall Street with the S&P taking a big break from recent exuberance and falling by 1.3%," said Susannah Streeter of Hargreaves Lansdown in a morning note.

"A big bounceback looks unlikely today as investors reassess expectations for borrowing costs this year."

Early Wednesday, the 10-year Treasury yield was almost flat at 4.29%. It spiked from 4.15% to 4.33% — its highest level since November — on Tuesday, fueled by the prospect of rates staying higher for longer.

The US Dollar Index, which tracks the buck's value against a basket of world currencies, was hovering around 104.9. It rose from below 104 to just shy of 105 on Tuesday.

Wall Street will be listening closely for hints at the Fed's next move when Austan Goolsbee, the Chicago Fed's president, and Michael Barr, the Fed's vice-chair for supervision, make scheduled comments later.

Several blue-chip companies are set to report earnings, including Cisco and two of Warren Buffett's biggest bets, Kraft Heinz and Occidental Petroleum.