Futures inch lower on Fed policy caution, China data hits sentiment

U.S. stock index futures edged lower on Wednesday as investors remained cautious ahead of inflation data and the Federal Reserve's policy meeting next week, while worse-than-expected China exports data for May hit sentiment.

Wall Street's main indexes ended higher on Tuesday, with S&P 500 up almost 20% from its October 2022 lows, underpinned by rising expectations that the Fed will hold interest rates steady at its policy meeting on June 13-14. U.S. shares have also been boosted by a rally in megacap stocks and a stronger-than-expected earnings season. However, some analysts say that profit-taking may be round the corner for big tech and other major growth stocks.

"Nasdaq is more than 40% up from its October lows, not posting a decent correction since mid-March. Therefore, the risks of a corrective setback seem to be increasing, especially with a potential liquidity squeeze from Treasury issuance looming," said Charalampos Pissouros, senior investment analyst at XM. Inflation data in the U.S. is expected to show consumer prices cooled slightly on a month-over-month basis in May but core prices are likely to have remained elevated, and the Fed is widely expected to hold interest rates.

Money market participants see a 75% chance that the U.S. central bank will skip raising interest rate in the June meeting but will hike in July, according to the CME's Fedwatch tool. Two-year Treasury note yield that best reflects interest rate expectations slipped by 2 basis points (bps), the same as the drop in yield on 10-year bonds.

China's May exports slumped 7.5% year-on-year, much larger than the forecast 0.4% fall and the biggest decline since January, raising concerns over global demand. At 5:37 a.m. ET, Dow e-minis were down 43 points, or 0.13%, S&P 500 e-minis were down 3.5 points, or 0.08%, and Nasdaq 100 e-minis were down 23.25 points, or 0.16%.

Among individual stocks, Netflix climbed 2.2% in premarket trading after Wells Fargo raised the stock's target price to $500 from $400 per share, the highest on Wall Street, according to Refinitiv. Coinbase shares rose 3.9% after hitting a seven-month low on Tuesday as the Securities and Exchange Commission sued the largest U.S. crypto exchange, accusing it of operating illegally, without having first registered with regulator.

Cathie Wood's Ark Invest bought 419,324 shares of Coinbase on Tuesday. Shares of Yext Inc jumped 18.4% premarket after the New York-based online marketing firm raised its annual earnings forecast.