Futures rise after bank rout, CPI data awaited

(Reuters) – U.S. stock index futures rose on Tuesday after a volatile session amid fears of fallout from the collapse of Silicon Valley Bank, while investors awaited an inflation report that could determine whether the central bank will pause its rate hikes in March.

The February consumer prices report, due at 8:30 a.m. ET (1330 GMT) from the Labor Department, will feed into the U.S. Federal Reserve‘s policy decision at its March meeting. Traders’ bets are equally split between a 25 bps rate hike and a no-hike scenario..

A Reuters poll of economists showed that the U.S. Consumer Price Index (CPI) likely increased by 0.4% last month after accelerating 0.5% in January amid sticky rental housing costs. On a yearly basis, CPI grew 6.0% in February, moderating from a 6.4% in rise the previous month.

SVB Financials sudden shutdown and fears of risks to other banks hammered the sector and broader markets in the past few days. The Nasdaq, however, ended higher on Monday as some sectors benefited from hopes the Fed could ease up on rates hikes.

“The bond markets have whipsawed in reaction to the banking sell-off, with the market now expecting that the Fed will be forced to go-slow on further rate hikes or even press pause this month, to restore financial stability,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“The CPI figures out later will be watched super-closely as another hot reading will reinforce expectations that a rate rise, albeit smaller, will be on the cards next week.”

The two-year Treasury yield, which best reflects interest rate expectations, tumbled below the 4% mark on Monday and is currently at 4.2%.

Federal Reserve Board governor Michelle Bowman is due to speak later in the day.

At 4:38 a.m. ET, Dow e-minis were up 117 points, or 0.37%, S&P 500 e-minis were up 16.25 points, or 0.42%, and Nasdaq 100 e-minis were up 56 points, or 0.47%.

Regional bank stocks rebounded in premarket trading, with First Republic Bank jumping 17.4%, a day after the mid-cap lenders Executive Chair Jim Herbert told CNBC the bank has been able to meet withdrawal demands with additional funding from JPMorgan Chase & Co.

Big U.S. banks, including JPMorgan Chase & Co, Citigroup and Wells Fargo, gained between 0.5% and 2.3% after losing ground in previous session.

U.S.-listed Chinese stocks such as Alibaba Group Holdings Ltd, JD.Com Inc and Baidu Inc were down around 2% as fears lingered about a contagion from the SVB collapse.

(Reporting by Shubham Batra and Amruta Khandekar; Editing by Saumyadeb Chakrabarty)