Sept 12 (Reuters) - Wall Street was set for a muted open on Thursday as a hot producer prices reading kept a smaller 25-basis point Federal Reserve rate cut firmly on the table.
The producer price index (PPI) for final demand rose 0.2% last month, compared to estimates of 0.1% growth. The core number, which strips out volatile food and energy prices, rose 0.3%, higher than the 0.2% forecast.
"Headline PPI inflation came in as expected, but the core rate followed the consumer's (consumer price index) core rate almost to the tee, a little bit more than expected," said Peter Cardillo, chief market economist at Spartan Capital Securities.
"If you look at today's PPI numbers it just confirms the Fed is not going to be as aggressive in cutting rates as the market was expecting."
Separately, initial claims for state unemployment benefits stood at 230,000 for the week ended Sept. 7, in line with estimates.
Meanwhile, vaccine maker Moderna (MRNA.O), slumped 13.1% in premarket trading after forecasting sales between $2.5 billion and $3.5 billion next year, below analysts' estimates.
A string of weakening employment and economic growth data over the past few weeks had led to rising bets on a larger-than-usual 50-basis point interest rate reduction from the U.S. central bank, but those expectations have largely faded.
After Wednesday's inflation report, traders now see an 85% chance of the Fed cutting interest rates by 25 bps when it meets on Sept. 17-18, according to CME's FedWatch Tool. It would be the first rate cut since March 2020.
"Our base case forecast looks for a 25 bps reduction in the federal funds rate at the September FOMC meeting followed by two 50 bps rate cuts at the November and December FOMC meetings," analysts at Wells Fargo said.Nvidia (NVDA.O), opens new tab, which rallied 8.2% on Wednesday following a report the U.S. government is considering allowing the firm to export advanced chips to Saudi Arabia, looked set to extend its winning run and was up 0.4% before the bell.
Dow E-minis were up 59 points, or 0.14%, S&P 500 E-minis were up 8.25 points, or 0.15% and Nasdaq 100 E-minis were up 8.5 points, or 0.04%.
Futures tracking the economically sensitive small-cap Russell 2000 rose 0.5%.
On Wednesday, a boost from the tech sector offset investor disappointment following the inflation data.
The tech-heavy Nasdaq (.IXIC), closed more than 2% higher, while the S&P 500 (.SPX), closed up 1% in volatile trading which saw the benchmark index fall as much 1.5% intraday.
U.S. consumer prices rose slightly in August, but underlying inflation showed some stickiness. The core reading, which excludes volatile food and energy components, climbed 0.3% compared to an estimated 0.2% increase.
Among other stocks, chemicals maker Dow (DOW.N), slipped 1.9% after lowering its third-quarter revenue forecast due to an unplanned event at one of its plants in Texas.
The U.S. Treasury announced new proposed rules for a new corporate alternative minimum tax that is expected to generate $250 billion in U.S. revenues over 10 years from about 100 large companies now paying an average rate of just 2.6%.
Reporting by Shashwat Chauhan and Lisa Mattackal in Bengaluru; Editing by Shounak Dasgupta and Maju Samuel
