The inflation report, due at 8:30 AM ET (1:30 PM GMT), is expected to show that US consumer prices rose 6.5% year-on-year in December, a slowdown from the increase in 7.1% recorded in November.
The core inflation figure, which excludes the prices of volatile items such as food and fuel, is expected to moderate to 5.7% in December from 6.0% the previous month.
“The wave of exuberance that has swept through markets appears to have peaked, with investors becoming a little more cautious as a snapshot of US inflation approaches,” said Susannah Streeter, senior analyst of Investments and Markets at Hargreaves Lansdown.
“Expectations that CPI data for December will show the price spiral moving away from the peak have fueled hopes that policymakers will exercise restraint on further rate hikes and may even cut interest rates later this year.” .
Major Wall Street indexes closed higher Wednesday, led by big tech stocks, with the S&P 500 and Nasdaq each gaining more than 1%.
Renewed optimism that the US central bank could soon ease its hawkish stance after seven interest rate hikes in 2022 has buoyed the market in recent sessions, although some Fed officials have reaffirmed their determination to check the inflation.
Money market participants see a 75% probability that the Fed will raise its key rate by 25 basis points in February to 4.50%-4.75% and expect the terminal rate to 4.94% by June.
Investors will be following weekly unemployment data on Thursday to gauge the strength of the US labor market, while comments are also expected from a number of Fed officials.
This week marks the start of quarterly earnings season. Big banks are expected to report lower earnings, while overall S&P 500 earnings are expected to decline year-over-year, according to Refinitiv.
As of 5:49 ET, the Dow e-mini was up 1 point, the S&P 500 e-mini was down 0.5 point, or 0.01%, and the Nasdaq 100 e-mini was down by 11 points, or 0.1%.
Bed Bath & Beyond Inc was up 20.9% in pre-market trading after climbing for three consecutive sessions despite lackluster quarterly results.
Netflix Inc gained 1.6% as Jefferies upgraded the company’s stock rating to “buy.”