Wall St futures muted as traders eye first key inflation report since government shutdown

By Johann M Cherian and Pranav Kashyap

Dec 5 (Reuters) – U.S. stock index futures were flat to slightly higher on Friday as Wall Street awaited a long-delayed inflation reading that could shape the Federal Reserve’s monetary policy path.

Traders have been pricing in an 87.2% chance that the Federal Reserve will lower borrowing costs when it meets this month, according to CME’s FedWatch Tool.

Focus is on the Commerce Department’s Personal Consumption Expenditures Price Index, the Fed’s preferred inflation gauge and the first major data release since a 43-day government shutdown froze official statistics. The report is due at 10 a.m. ET.

Economists polled by Reuters see PCE running at a 2.8% annual pace, a notch above August’s 2.7%, with monthly gains holding steady at 0.3%.

The data lands just days before what is shaping up to be one of the Fed’s most contentious meetings in years, as policymakers debate whether to cut borrowing costs amid persistent price pressures and a still-resilient labor market.

Secondary labor indicators so far show little sign of an imminent slowdown in hiring, giving inflation hawks fresh ammunition as the central bank looks for clearer progress toward its 2% target.

The Fed is cautious and warning against assuming a fixed rate path because it fears inflation, driven partly by tariffs and partly by strong fiscal stimulus, could persist and move higher, said Kyle Rodda, senior financial market analyst at Capital.com.

At 7:40 a.m. ET, Dow E-minis were up 46 points, or 0.1%, S&P 500 E-minis were up 13.5 points, or 0.2% and Nasdaq 100 E-minis were up 91.75 points, or 0.36%.

Still, dovish remarks from several influential policymakers in recent weeks have helped underpin risk appetite.

Investors also expect the Fed to deliver another quarter-point rate cut by June 2026.

“Something a bit on the high (inflation) side is unlikely to see the markets price out a cut next week. But it could lower the odds at the margins and raise doubts about the path for policy in 2026,” Rodda said.

Wall Street’s three major indexes seesawed through the previous session before ending little changed.

All three remained on track for modest weekly gains, with the benchmark S&P 500 moving to within about 1% of a record high.

The standout was the domestically focused small-cap index , which jumped 1.2%, outpacing the broader market as traders rotated into rate-cut beneficiaries.

In premarket trading, shares of Warner Bros. Discovery were up 3.2% after Netflix agreed to buy the company’s film and television studios, along with its streaming assets, for $72 billion.

Shares of the streaming giant were down 2%.

Hewlett Packard Enterprise fell 9.7% after forecasting first-quarter revenue below estimates, as it sees a fall in AI server income due to customers shifting their orders to the second half of the year.

Oklo fell 6.1% after the nuclear technology firm unveiled a planned $1.5 billion share sale.

(Reporting by Johann M Cherian in Bengaluru; Editing by Tasim Zahid)