- Stocks inched up on Wednesday ahead of the publication of a critical monthly inflation report.
- Stubborn inflation would slash the odds of the Federal Reserve cutting interest rates this summer.
- Small businesses raised inflation concerns, while TSMC reported strong first-quarter revenue growth.
Stocks edged higher in premarket trading on Wednesday as Wall Street awaited the release of inflation data that could dictate the path of interest rates this year.
S&P 500 and Dow Jones Industrial Average futures were up 0.1% shortly after 5 a.m. ET, while Nasdaq 100 futures were up 0.2%. The key 10-year Treasury yield was little changed at 4.36%, while the US Dollar Index was almost flat at 104 points.
"Markets seem poised for an inflation figure that may exceed expectations as odds of a June cut have decreased," Julien Lafargue, the chief market strategist at Barclays' private-banking arm, said in a morning note.
Investors had hoped the Federal Reserve would begin cutting its benchmark interest rate — which it hiked from almost zero to over 5% to curb inflation — by the summer.
However, they're now less optimistic that will happen following a hot jobs report last week that fanned fears inflation increased in March.
The market mood was also dampened by the news on Tuesday that small business optimism in March hit its lowest level since December 2012, and has remained below its 50-year average for 27 consecutive months. The surveyed employers cited inflation as their chief concern.
More positively, Taiwan Semiconductor Manufacturing Corp. (TSMC) reported its first-quarter revenue jumped by over 16%. The microchip supplier's solid growth and expansion plans suggest the artificial-intelligence boom is still underway.
"TSMC is no small fry — it's the biggest contract chipmaker in the world, with high-caliber customers like Apple and Nvidia on its books," Sophie Lund-Yates, the lead equity analyst at Hargreaves Lansdown, said in a morning note.
"These numbers do have a positive read-across, not only for fellow chipmakers but for tech stocks relying on AI excitement to continue."
Delta Air Lines and Rent the Runway are among the companies set to report earnings on Wednesday.
The highlights of the economic calendar include the headline inflation report and the release of the minutes from the Fed's March meeting.
