By Sruthi Shankar and Amruta Khandekar
(Reuters) -U.S. stock index futures rose on Wednesday, paving the way for fresh gains on Wall Street, after an encouraging inflation report fueled hopes U.S. interest rates have peaked and Target jumped on an upbeat holiday-quarter profit forecast.
Target shares advanced 14.2% before the bell as the big-ticket retailer forecast fourth-quarter profit largely above Wall Street expectations on easing supply-chain costs.
The upbeat forecast also lifted shares of rival Walmart up 1.2%.
The gains come after the benchmark S&P 500 and the tech-heavy Nasdaq posted their biggest daily percentage jump in more than six months on Tuesday as softer-than-expected consumer prices data supported the view that the U.S. Federal Reserve was done raising interest rates.
Money market futures suggest traders have priced in a 99.7% chance the U.S. central bank will keep rates steady in December, as per CME Group's Fedwatch tool. They also see the first rate cut of the cycle to kick off in May 2024.
Investors will focus on fresh data, due at 8:30 a.m. ET (1330 GMT), which is expected to show producer prices rose 1.9% in October from last year, slowing from a 2.2% increase in September.
Separately, retail sales are expected to have slipped 0.3% on a month-over-month basis in October after 0.7% increase in September.
"If we get softer numbers today, then it will simply further entrench views that the Fed's current hiking cycle is over. But the impact on the market may be somewhat subdued, as most people are thinking that anyway," said Stuart Cole, head macro economist at Equiti Capital.
"The risk is that we get a very soft number which is sufficient to bring forward expectations of when the first interest cut will be delivered."
Focus will also be on meeting between U.S. President Joe Biden and Chinese leader Xi Jinping for the first time in a year on Wednesday, for talks that may ease friction between the adversarial superpowers on military conflicts, drug-trafficking and artificial intelligence.
At 7:07 a.m. ET, Dow e-minis were up 114 points, or 0.33%, S&P 500 e-minis were up 18.75 points, or 0.42%, and Nasdaq 100 e-minis were up 93.25 points, or 0.59%.
Further aiding the mood, the U.S. House of Representatives passed a temporary spending bill that would avert a government shutdown, with broad support from lawmakers in both parties.
To prevent a shutdown, the Senate and Republican-controlled House must enact a legislation that Biden can sign into a law before current funding for federal agencies expires at midnight on Friday.
Among other stocks, U.S.-listed shares of Chinese ecommerce firm JD.com climbed 5.2% after the company posted a surge in profit as supply chain challenges eased.
Sirius XM gained 7.6% as Warren Buffett's Berkshire Hathaway took a stake in the audio entertainment company.
(Reporting by Sruthi Shankar and Amruta Khandekar in Bengaluru; Editing by Shinjini Ganguli and Maju Samuel)
