(Reuters) -U.S. stock index futures were muted on Thursday following a strong run on Wall Street this week and investors awaited fresh economic data to gauge the Federal Reserve's monetary policy verdict next month.
Data reflecting labor market weakness has strengthened expectations that the central bank will potentially lower interest rates next month, despite another report suggesting underlying price pressures are on the rise.
The expectations for a dovish Fed encouraged investors to lap up riskier
equities, sending the benchmark S&P 500 and tech-heavy Nasdaq to record highs in the previous two sessions, and putting the blue-chip Dow within striking distance of an all-time high.
Traders are fully pricing in a 25-basis-point interest rate cut by the central bank in September, according to the CME FedWatch tool, and expect cuts of a similar size in October and December.
Analysts are not so sure.
"The market is too complacent about the apparent certainty the Fed will cut next month, especially with inflation having been above target for 53 months running, and clearly moving in the wrong direction," said Michael Brown, senior research strategist at Pepperstone.
A report also showed San Francisco Fed President Mary Daly pushed back against the need for a 50-basis-point interest rate cut next month, a day after Treasury Secretary Scott Bessent said an aggressive half-point cut was possible.
At 05:24 a.m. ET, Dow E-minis were up 8 points, or 0.02%, S&P 500 E-minis were down 3 points, or 0.05%, and Nasdaq 100 E-minis were down 21.25 points, or 0.09%.
Focus is now on a string of data due at 8:30 a.m. ET, including weekly jobless claims and Producer Price Index for the month of July, at a time when markets are also concerned about the quality of economic data following budget and staffing cuts.
Some of the components of the producer inflation report feeds into the Fed's preferred inflation gauge - the Personal Consumption Expenditures Price Index.
Wall Street's recovery from April lows has also elevated valuations of the S&P 500 beyond long-term averages, aided by better-than-expected earnings from megacap companies and more clarity on trade deals.
"I retain my bullish equity bias. Frankly, it's tough not to – earnings growth is impressive; the tone on trade is becoming much softer; the economy remains resilient; and, even if that final point falters, the Fed (has) plenty of room to ease," said Brown.
Cisco Systems forecast first-quarter revenue above estimates, as the artificial intelligence boom boosted demand for its networking equipment from cloud customers. Shares were down 1% in premarket trading.
Birkenstock gained 3.5% after the sandal maker beat quarterly expectations. Quarterly reports from Deere and Tapestry are also due before the bell.
Meanwhile, a Reuters report said President Donald Trump's administration is likely weeks away from announcing the results of a probe into pharmaceutical imports and new sector-specific U.S. tariffs.
Healthcare companies such as Eli Lilly and Merck were little changed. The broader sector has declined the most on the S&P 500 this year.
(Reporting by Johann M Cherian in Bengaluru; Editing by Devika Syamnath)
