S&P 500 Futures, US Treasury bond yields remain dicey as traders await US inflation

• Market sentiment remains cautious as traders await US CPI for January.
• Hopes of upside surprise, hawkish Fed talks probe the previous optimism.
• S&P 500 Futures seesaw after the biggest daily jump of February.
• US 10-year Treasury bond yields remain depressed following a U-turn from monthly peak.

Markets depict the typical pre-data anxiety as traders await the all-important US Consumer Price Index (CPI) for January during early Tuesday. Adding to the lack of trading momentum could be the cautious mood ahead of multiple key releases from Japan, Europe and the UK.

While portraying the mood, the S&P 500 Futures print mild losses around 4,140, following the biggest daily jump of the month. That said, the US 10-year Treasury bond yields drop nearly two basis points to 3.69% at the latest, after reversing from a one-month high the previous day. It should be noted that the US Dollar Index (DXY) remains pressured while equities in the Asia-Pacific region trade mixed at the latest.

Other than the anxiety ahead of crucial catalysts, downbeat prints of the US inflation expectations contrasts with the hawkish Fed speak to also challenge the market moves. On the same line, hopes of positive surprise from the US inflation and fresh US-China jitters add strength to the mild pessimism.

On Monday, Fed Governor Michelle Bowman said that the Federal Reserve will need to continue to raise interest rates in order to get them to a level high enough to bring inflation back down to the central bank's target rate, per Reuters. Before him, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.”

Elsewhere, the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) eased from monthly highs to 2.31% and 2.44% at the latest.

On a different page, “US Congress will take a bipartisan look at unidentified aerial objects that have made their way into U.S. and Canadian airspace, and why they were not found sooner,” said US Senate Majority Leader Chuck Schumer. It’s worth noting that a US Military General previously ruled out odds favoring the likely hand of China in the “unidentified objects” which were shot down during the weekend.

Looking forward, the year-start optimism and revival of work contracts seem to keep central bank hawks hopeful as the US inflation data looms. However, the US CPI for January bears the downbeat YoY forecast of 6.2% versus 6.5% and can favor the risk-takers in case of either matching or declining below expectations.