Stock Market Today: Dow futures rise as traders await July PPI inflation report

Gains for stock index futures have been pared back, with the S&P 500 now in line for an all but flat open in a few hours time.

Not helping the mood is a poorly-received earnings update from Home Depot.

Shares in the home improvement retail giant are down 5% after it reported fiscal second-quarter earnings that beat expectations but comparable sales that missed and it lowered its full-year outlook.

Japan’s stock market on Tuesday surged to its highest level in nearly two weeks, erasing the losses suffered during the August 5th plunge that rattled equities worldwide.

The Nikkei 225 index returned from Monday’s holiday to jump 3.45%, recovering the 36,000 mark as a weakening yen boosted exporters and investors welcomed rallies in Europe and the U.S.

The Nikkei had crashed 12% to 31,458 on the previous Monday after concerns about a faltering U.S. economy and fears technology stocks were overvalued created a risk-averse mood across global bourses.

The sell-off was exacerbated by a sharp rally in the Japanese yen, which is believed to have triggered a scramble to close so-called carry trades — selling the yen to buy other assets — and which in turn forced traders to liquidate long positions in stocks.

The rebound in the Nikkei 225 since than has been helped by the yen weakening afresh after Bank of Japan officials stressed the central bank would be unlikely to raise interest rates again when markets were in such turmoil.

The yen strengthened to below 142 versus the U.S. dollar on August 5, but by August 13 was trading around 148.

“The recent sharp moves in the yen have subsided for now, boosting exporters generally and the main index in particular,” said Richard Hunter, head of markets at Interactive Investor.

“The Nikkei has managed to regain a positive performance so far this year which equates to almost 9%, having recovered from the violent swings of last week,” he added.

The Nikkei 225 remains about 13% below the record achieved in July.

Here are some of the companies presenting results on Tuesday:

Before the opening bell.

After the close.

How are stock-index futures trading:

On Monday, the Dow Jones Industrial Average fell 141 points, or 0.36%, to 39,357, the S&P 500 increased 0 points, or 0%, to 5,344, and the Nasdaq Composite gained 35 points, or 0.21%, to 16,781.

Futures show stocks will extend their rally from the slump of a week ago, though investors at the same time will be wary of data in the next few days that may impact the chances of interest rate cuts coming next month.

The producer prices index report will be published at 8:30 a.m. Eastern on Tuesday, consumer price index data will be released on Wednesday, and retail sales on Thursday, all covering July.

The ideal outcome for equity investors will be factory-gate and high-street inflation that continues to creep back towards the Federal Reserve’s 2% target, alongside retail sales that indicate households are feeling reasonably chipper.

“Optimistically, the markets seem to be looking past any potential mini spikes in the CPI—unless, of course, the print throws a curveball far, high, and outside expectations,” says Stephen Innes, managing partner at SPI Asset management.

“This scenario would challenge assumptions about the Fed’s ability to pivot towards more aggressive rate cuts to ensure a soft [economic] landing,” Innes adds.

Meanwhile, the overall mood in markets is notably more relaxed than that witnessed just over a week ago, when worries about overvalued tech companies, fretting about a U.S. recession and the apparent forced liquidation of positions linked to the Japanese yen carry trade caused a spike in volatility.

On Tuesday, the CBOE VIX index, a measure of expected S&P 500 volatility known as Wall Street’s fear gauge, was trading around 20, way below the 65 level to which it spiked last week during the stock market plunge.