Stock Futures Drop on Hotter-Than-Forecast Core CPI, Oil Climbs

3qia3vt3ky)y9)vbw{u(3}yt_media_dl_1.png Bloomberg Intelligence

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(Bloomberg) — Traders pulled back from risk assets with a torrid run in US equities running out of steam as April inflation data came in hotter than economists’ estimates and worsening tensions between Washington and Iran sent oil prices higher.

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Contracts on the S&P 500 Index dropped 0.3% as of 8:45 a.m. on Tuesday in New York, while futures on the Nasdaq 100 Index were down about 0.7%. Technology stocks lagged the most after weeks of outsized gains, with rising risks around geopolitics and inflation adding another level of uncertainty for markets already contending with elevated valuations. 

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US inflation continued to accelerate in April amid an ongoing climb in gasoline prices driven by the Iran war.

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The consumer price index rose 3.8% from a year earlier, according to Bureau of Labor Statistics data out Tuesday, marking the fastest pace since 2023. From a month earlier, prices were up 0.6%. The core CPI, which excludes food and energy, increased 0.4% from a month earlier and 2.8% from a year earlier, boosted in part by a statistical quirk in the report’s measure of rents resulting from the 2025 government shutdown.

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“Inflation is likely to take a backseat over the coming months as investors remain focused on earnings, economic growth, and the AI-driven capex cycle,” said Tim Urbanowicz, chief investment strategist, Innovator ETFs from Goldman Sachs Asset Management, in an email. “The Fed has been clear that it is willing to look through any temporary inflation spike tied to the Iran conflict, and that remains the key consideration for investors in the near term.”

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Meanwhile, US President Donald Trump rejected Iran’s latest offer and called Iran’s response to his proposal a “piece of garbage,” warning that the ceasefire was on “life support.” Shipping traffic in the Strait of Hormuz remained at a standstill, sending oil prices above $100 a barrel.

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So far, profits are drowning out the noise. Even as an overheating stock rally raises the risk of a reversal, most Wall Street pros remain overwhelmingly bullish with historically strong corporate earnings anchoring their views. Global earnings growth is at a four-year high, driven by technology companies, per Deutsche Bank AG’s Binky Chadha. Corporate America has outstripped expectations by the widest margin outside the Covid-19 era since at least 2013, according to Bloomberg Intelligence data.

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Robust profits from firms are currently outweighing geopolitical concerns in financial markets despite US-Iran tensions, according to JPMorgan Chase & Co.’s Dubravko Lakos-Bujas.

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“Earnings, the AI narrative has been overriding the whole geopolitical oil situation,” Lakos-Bujas said in a Bloomberg Television interview. “Now obviously, if you fast forward another four or five weeks and the situation remains unresolved, then you get complacency.”

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A multitude of Wall Street firms in recent weeks — including RBC Capital Markets, HSBC Holdings Plc, and Barclays Plc — have upgraded their year-end S&P 500 forecasts on that strength. Veteran strategist Ed Yardeni raised his outlook to the highest among peers, expecting the gauge to reach 8,250 by year-end.