US futures fall for a third day after a widespread sell-off as investors brace for a jump in inflation

• US futures fell for a third day as traders braced themselves for consumer inflation data.
• The figures are expected to show a jump in inflation in April, although largely due to base effects.
• Investors worry that higher prices could erode company earnings and make the Fed cut back support.
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US futures slipped again on Wednesday, following a widespread sell-off of stocks on Monday and Tuesday, as investors nervously awaited inflation data that is expected to show a jump in prices.

European stocks climbed after a mixed session in Asia. Oil prices edged up as the US dealt with a blockage to a major pipeline and the dollar rose.

S&P 500 futures were down 0.24%, while futures for the teach-heavy Nasdaq 100 were 0.42% lower. Dow Jones futures were off by 0.27%.

The drops followed sharp sell-offs on Monday and Tuesday. At the start of the week, worries over inflation caused tech stocks to tumble, in part because rising prices dent the appeal of companies whose full earnings potential lies in the future. But the sell-off spread to the more industrially focused Dow Jones on Tuesday, which witnessed its largest one-day drop since late February.

Now, the focus of traders and investors is locked onto US consumer price index inflation data, which is due at 8.30 a.m. ET.

"With the market fixated on the outlook for inflation, this was always going to be an important number, but the huge miss versus expectations on the US jobs report last week has just made this week's US inflation print so much more important," Matthew Cady, strategist at investment firm Brooks Macdonald, said.

The US economy added just 266,000 jobs in April, data showed Friday, far less than than the 1 million or so analysts had expected.

The figures caused many economists to downgrade their expectations for inflation. But over the weekend, traders and investors reappraised the data, with some analysts saying the weak jobs report was due to labor shortages, which would be inflationary.

Wednesday's data is expected to show headline CPI inflation rose to 3.6% year-on-year in April, up from 2.6% in March, in large part because prices were subdued in April 2020 when coronavirus hit.

The key question that is worrying markets is whether the Federal Reserve will make good on its promises to look past this rise in inflation, which it says will be "transitory."

Any sign that the Fed will cut back on support for the economy sooner than expected would hit stocks, which have boomed thanks to ultra-loose monetary policy over the last year. Fast-growing tech stocks are particularly vulnerable, as they look more attractive when inflation and market interest rates are low.

Asian stocks were mixed overnight, with Japan's Nikkei 225 falling 1.61% while China's CSI 300 rose 0.43%.

In Europe, the continent-wide Stoxx 600 index was up 0.33% and the UK's FTSE 100 had climbed 0.6% after both suffered sharp falls on Tuesday.

The UK economy grew 2.1% in March, data showed on Wednesday, stronger than the 1.3% growth expected, as schools reopened and businesses and consumers looked ahead to a vaccine-driven rebound.

In the US, the dollar index was 0.14% higher at 90.27 ahead of the inflation report, rebounding slightly after falling sharply in recent days.

The yield on the key 10-year US Treasury note dipped 0.9 basis points to 1.615% on Wednesday, down from March's highs, but well above the 0.92% level seen at the start of the year. Yields move inversely to prices.

Oil prices inched higher as the US continued to grapple with the fallout from the closure of the Colonial Pipeline, which caused gasoline prices to spike. Brent crude rose 0.32% to $68.78 a barrel, while WTI crude climbed 0.38% to $65.53 a barrel.

Prices were boosted by data that showed a drop in inventories, while investors continue to forecast a rebound in demand as economies recover, according to Neil Wilson, chief markets analyst at trading platform Markets.com.