By Ankika Biswas and Shristi Achar A
(Reuters) - Wall Street's main indexes were set to open higher on Thursday as hotter-than-expected economic data did not dent hopes of a pause in rate hikes in September, while investors awaited a highly anticipated Arm Holdings' stock market debut.
Retail sales rose more than expected in August on higher gasoline prices, while initial claims for state unemployment benefits climbed to a seasonally adjusted 220,000 for the week ended Sept. 9 from 217,000 the week before.
Monthly producer prices for final demand rose 0.7% in August, against expectations of a 0.4% increase. On an annual basis, they increased 1.6% compared with estimates of a 1.2% rise.
Data on Wednesday showed the annual rise in core consumer prices, excluding volatile items like food and energy, was the smallest in nearly two years, driving the S&P 500 and Nasdaq higher in the previous session.
"Investors are largely brushing off the hotter-than-expected inflation numbers, just like the consumer price index came in hotter than expected," said Greg Bassuk, chief executive officer at AXS Investments in New York.
"One of the reasons why investors are taking it in stride is because the data was largely driven by a jump in energy and gas ... however, investors should brace for another potential rate hike this year."
The two-year U.S. Treasury yield, which best reflects short-term interest rate expectations, briefly reclaimed the 5% mark following the data after coming under pressure as the European Central Bank delivered a 25-basis-point rate hike.
Rising oil prices could keep inflation at elevated levels, analysts said. Higher gasoline prices pushed the headline inflation to a 14-month high, while persistent growth in prices of services kept alive the prospects of a November hike.
Traders see a 97% chance of the Fed holding rates in its Sept. 20 policy meeting and a near 61% likelihood of a pause in November, according to the CME FedWatch Tool.
Citigroup (NYSE:C) expects the Fed to hike interest rates by 25 basis points in November, compared with its previous forecast of a September hike.
Shares of Arm Holdings will make their widely anticipated debut on the Nasdaq after the chip designer notched a $54.5 billion valuation in its offering, priced at $51 per share, on Wednesday.
"There's nothing better than AI chip stocks right now. Everybody wants a piece of it, it's like they're the belle of the ball," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
Chipmakers including Nvidia, Micron Technology (NASDAQ:MU) and Advanced Micro Devices (NASDAQ:AMD) added between 0.5% and 0.9% before the bell.
At 8:58 a.m. ET, Dow e-minis were up 155 points, or 0.45%, S&P 500 e-minis were up 21.5 points, or 0.48%, and Nasdaq 100 e-minis were up 64.5 points, or 0.41%.
HP fell 3.9% after Warren Buffett's Berkshire Hathaway (NYSE:BRKa) sold about 5.5 million shares of the company.
Visa (NYSE:V) slipped 2.3% after the payment processing giant said it was engaging with Class B shareholders on a proposal to convert their shares to Class C or Class A.