S&P 500 futures turn negative after US inflation rises more than expected

S&P 500 futures turned negative on Thursday after inflation data for May showed a bigger-than-expected increase, while weekly jobless claims dipped less than estimated.

At 8:33 a.m. ET, Dow e-minis were up 38 points, or 0.11%, S&P 500 e-minis were down 3.75 points, or 0.09% and Nasdaq 100 e-minis were down 56.75 points, or 0.41%.

Prices paid by U.S. consumers rose in May by more than forecast, extending a months-long buildup in inflation that risks becoming more established as the economy strengthens.

The consumer price index climbed 0.6% from the prior month after a 0.8% jump in April that was the largest since 2009. Excluding the volatile food and energy components, the so-called core CPI rose by a larger-than-forecast 0.7%, according to Labor Department data Thursday.

The median forecast in a Bloomberg survey of economists called for 0.5% gains in both the overall CPI and the core.

Compared with the same month a year ago, the CPI jumped 5%, the largest annual gain since August 2008, though the figure remains distorted by the base effect. The comparison to the pandemic-depressed index in May 2020 makes year-over-year inflation appear stronger.

The core measure rose 3.8% from 12 months ago, the most since 1992.

Applications for U.S. state unemployment insurance fell for a sixth straight week, consistent with further improvement in the labor market and robust economic growth.

Initial claims in regular state programs decreased by 9,000 to 376,000 in the week ended June 5, Labor Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for 370,000 applications.

Price pressures continue to build across the economy as businesses scramble to balance a rush of demand against shortages of materials and, in some cases, labor. Shipping bottlenecks, higher input costs and rising wages are challenges to companies looking to protect profit margins.

Strong consumer spending on merchandise -- in part driven by government stimulus -- has led to growing orders backlogs and lean inventories. The lifting of pandemic restrictions, increases in vaccinations and a flurry of social activity is translating into more services demand -- another propellant for inflation.

The question economists and investors are wrestling with is whether these factors will have a temporary impact on inflation as the Federal Reserve expects or whether they will become more ingrained against a backdrop of massive fiscal and monetary policy support.