Stock futures slip as Treasuries hold steady ahead of consumer price index: market close

(Bloomberg) — U.S. stock futures edged lower on Wednesday as investors awaited key U.S. inflation data and feared that President-elect Donald Trump's proposed “America First” policy will fuel price gains.

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Nasdaq 100 futures contracts fell 0.2% while Treasury bonds stabilized after another selloff on Tuesday. After Elon Musk and Vivek Ramaswamy were tapped to lead the new Ministry of Government Efficiency, Musk's electric vehicle maker Tesla Inc. rallied in premarket trading, as did Ramaswamy-founded biotech company Roivant Sciences Ltd.

Traders are buying inflation hedges and pricing in fewer rate cuts next year amid concerns that Trump's pro-growth agenda could trigger price pressures. Today's US data is expected to show the headline consumer price index rose 0.2% for the fourth month.

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“We have invested in long-term inflation-linked bonds in the U.S., where I think the risk of inflation is highest,” Freddie Lait, managing partner at Latitude Investment Management in London, said in an interview with Bloomberg TV. “I would look at the Trump victory and think that has become more likely.”

U.S. yields remained stable across the curve after rising about 10 basis points on Tuesday. The prospect that Trump's announced measures such as tax cuts and tariffs could increase price pressure and force the Federal Reserve to keep interest rates elevated weighed on government bonds. Traders are pricing in just over a 50 percent chance of another quarter-point cut in December after two- and five-year Treasury yields rose to their highest since July.

The president-elect's anti-trade stance is already weighing on assets in developing countries. An MSCI index of stocks excluding the U.S. is having its worst day in three months, while an index of emerging market currencies is on the verge of erasing this year's gains. China's yuan fell to a three-month low on Tuesday, forcing authorities to set the currency's reference rate higher.

The dollar's strength has pushed the yen above 155 per dollar for the first time since July, raising the risk that Japan will intervene to slow the depreciation.

A gauge of the dollar was little changed on Wednesday, approaching two-year highs. Bitcoin also fell after a record-breaking rally took the digital asset to nearly $90,000.

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