A look at the day ahead in U.S. and global markets from Mike

Dolan

Wall Street seems to have lost direction in another shaky start

to the week for some of its megacap stocks and now needs some

clearance from Tuesday's U.S. inflation update to steady the

ship.

In an illustration of just how quickly this year's slightly

hotter inflation readings so far can feed consumer expectations,

the New York Federal Reserve's latest household survey might be

another red flag at the central bank.

Longer-run household inflation expectations deteriorated in

February, the Fed survey showed. Although the outlook one year

out was steady at 3%, respondents' view of inflation three years

from now climbed to 2.7% from 2.4% - the first rise since

September.

Even though the Fed is no longer expected to execute its

first interest rate cut later this month - futures have shifted

to an 80% chance of a June move instead - a lot rides on today's

consumer price inflation readout for February.

Headline annual CPI inflation is expected to be steady at

3.1% - with the "core" rate ebbing to 3.7% from 3.9% the prior

month.

Led by another 2% drop in artificial intelligence bellwether

Nvidia ( NVDA ) - which has now recoiled more than 7% since

Thursday - the S&P500 and Nasdaq fell back again

on Monday ahead of the inflation report. S&P500 futures firmed

up slightly overnight, as has Nvidia ( NVDA ) itself.

Three of the so-called Magnificent Seven megacaps - Apple,

Alphabet and Tesla - are still in negative territory for the

year to date.

Dragging on sentiment yesterday were disappointing earnings

updates from the likes of Broadcom ( AVGO ) and Marvell

Technology ( MRVL ), but shares in database giant Oracle

surged more than 13% overnight after it beat estimates

on demand for cloud-computing services due to the AI boom.

Boeing ( BA ), however, has been a saga of its own.

Its underperforming stock was hit by another 3% drop on

Monday after at least 50 people were hurt when a Boeing 787

operated by LATAM Airlines dropped abruptly mid-flight from

Sydney to Auckland.

And its shares fell another 1% overnight on a New York Times

report that the Federal Aviation Administration's audit of its

737 MAX production process - conducted after a panel blew off on

an Alaska Airlines jet in January - failed 33 of 89 tests.

But perhaps the biggest impact of today's inflation news

will be on Tuesday's latest $39 billion auction of 10-year

Treasury notes.

Ten-year yields backed up to about 4.10% on

Monday and held there overnight.

Fiscal policy twists were also in the background for

Treasuries. U.S. President Joe Biden sketched his policy vision

for a potential second four-year term on Monday, unveiling a

$7.3 trillion election-year budget aimed at convincing sceptical

Americans that he can run the economy better than Donald Trump.

Biden's budget for the 2025 fiscal year, which starts this

October, includes raising the corporate income tax rate to 28%

from 21% and forcing those with wealth of $100 million to pay at

least 25% of their income in taxes.

A proposal to bring down deficit spending by $3 trillion

over 10 years would slow but not halt the growth of the $34.5

trillion national debt. Deficits would total $1.8 trillion in

the 2025 fiscal year, 6.1% of GDP, before falling to under 4%

over a decade, the White House forecast.

Overseas, Japan's yen fell back and the Nikkei stocks

benchmark steadied after Bank of Japan Governor Kazuo

Ueda said the economy was recovering but also showed signs of

weakness - offering a slightly bleaker assessment than in

January in a nod to a recent batch of soft data on consumption.

That raised some doubts again about whether the BOJ would

indeed pull the trigger on tightening monetary policy as soon as

this month.

The dollar was firmer across the board ahead of the

CPI report.

In China, mainland shares were firmer and Hong

Kong's Hang Seng jumped more than 3% - led by its tech

sector.

Shares of China Vanke reversed early losses,

climbing 0.6% as the country's No. 2 property developer said its

"current operation and refinancing are normal and financing

channels are stable" after Moody's on Monday withdrew Vanke's

'Baa3' rating.

Key diary items that may provide direction to U.S. markets later

on Tuesday:

* U.S. Feb consumer price index, Cleveland Fed Feb median CPI

* U.S. Treasury auctions $39 billion of 10-year notes

* U.S. corp earnings: Archer-Daniels-Midland

* European Union finance ministers meet in Brussels

* Bank of England policymaker Catherine Mann speaks

(By Mike Dolan, Editing by Bernadette Baum;

[email protected])