By Amruta Khandekar and Ankika Biswas
(Reuters) - Wall Street was set for a subdued open on Friday after a hotter-than-expected producer prices report dampened expectations of imminent interest rate cuts by the U.S. Federal Reserve.
A Labor Department report showed the producer price index (PPI) rose 0.3% month-on-month in January, compared with the 0.1% increase expected by analysts polled by Reuters. Annually, it rose 0.9% versus estimates of 0.6% growth.
Treasury yields spiked after the report, with the yield on the benchmark ten-year note last at 4.3264%, as traders added to bets that the Fed may defer the first rate cut until after June.
The PPI data follows a selloff in equity markets earlier this week that was driven by a hotter-than-expected consumer prices report, though a slump in January retail sales provided some relief on Thursday.
"We continue to believe inflation is moderating. Data doesn't move in a straight line, there will be bumps in the road," said Brian Klimke, chief market strategist at Cetera Investment Management.
"But if we continue to get this hot inflation data it could delay things (rate cuts) maybe to June. As of now, June is looking more and more likely."
Most megacap stocks gave up early gains, though Nvidia was up 1.5% after Oppenheimer hiked its price target on the chip designer's stock.
The tech-heavy Nasdaq is set to snap a five-week winning streak, while the benchmark S&P 500 also lost some steam this week after jumping more than 5% so far this year.
Robust corporate earnings and a surge in enthusiasm around the potential for artificial intelligence has helped the S&P 500 close above the 5,000-point mark for the fourth time this year.
Later in the day, focus will be on remarks by Fed's Richmond President Thomas Barkin and San Francisco Fed President Mary Daly, both voting members this year.
Atlanta Fed President Raphael Bostic on Thursday noted he saw fewer rate cuts in his last forecasts compared with his colleagues in part because he has been expecting less steady progress on inflation.
Later on Friday, eyes will also be on a U.S. consumer sentiment survey for February.
At 8:49 a.m. ET, Dow e-minis were down 156 points, or 0.4%, S&P 500 e-minis were down 14.5 points, or 0.29%, and Nasdaq 100 e-minis were down 1.5 points, or 0.01%.
Among big movers, Applied Materials (NASDAQ:AMAT) jumped 9.2% in premarket trade after the semiconductor equipment supplier forecast better-than-expected second-quarter revenue on strong demand for advanced chips used in AI.
Roku slumped 17.1% after forecasting a bigger first-quarter loss, while crypto exchange Coinbase (NASDAQ:COIN) Global jumped 14.4% on posting its first quarterly profit since 2021.
DoorDash (NASDAQ:DASH) dropped 8.4% as the delivery firm forecast a quarterly profitability metric below expectations, hurt by higher labor costs.