Futures fall as investors brace for earnings season; Tesla dips

(Reuters) - U.S. stock index futures edged lower on Friday, ahead of the third-quarter earnings season kickoff, after hotter-than-expected September inflation data solidified expectations for a 25-basis-point rate cut by the Federal Reserve in November.

Shares of Tesla dropped 5.8% in premarket trading after the EV maker unveiled its long awaited robotaxi, but did not provide details on how fast it could ramp up production or deal with potential regulatory hurdles.

Major financial companies kick off the third-quarter earnings season later in the day. JPMorgan Chase and Wells Fargo slipped about 0.2% each ahead of their scheduled results before the bell.

With major indexes trading around record highs and the benchmark S&P 500 up over 21% year-to-date, third-quarter earnings will test whether 2024's rally can be sustained amid uncertainty over monetary policy, geopolitical risks and the upcoming U.S. presidential elections.

Wall Street closed slightly lower on Thursday after a keenly watched Consumer Price Index report showed inflation rose higher than expected in September, but an uptick in jobless claims pointed to potential weakness in the labor market.

Still, bets on a 25-bps rate cut from the U.S. central bank in November remained intact, with analysts pointing to the impact of Hurricane Helene and an ongoing strike at Boeing as muddying jobless claims data.

"On the whole, there is relatively little in the data that is likely to dispel the FOMC’s confidence in inflation returning towards the 2% inflation target over the medium term," said Michael Brown, senior research strategist at Pepperstone.

Traders are pricing in a roughly 84% chance of a 25-bps reduction at November's meeting and see a slight chance - about 16% - of no change at that meeting, according to CME's FedWatch.

On the other hand, Atlanta Federal Reserve President Raphael Bostic said he was open to keeping rates unchanged next month.

Also on deck are Producer Price Index data and the University of Michigan's consumer sentiment survey, as well as speeches from Fed officials Michelle Bowman, Lorie Logan and Austan Goolsbee through the day.

At 5:00 a.m. ET, Dow E-minis were down 48 points, or 0.11%, U.S. S&P 500 E-minis were down 12 points, or 0.21% and Nasdaq 100 E-minis were down 69.75 points, or 0.34%.

U.S.-listed shares of Chinese companies lost ground ahead of a closely watched fiscal stimulus update from Beijing on Saturday. Among them, JD.com lost 3%, Alibaba Group dipped 1.8% and PDD Holdings fell 2.7%.

(Reporting by Lisa Mattackal in Bengaluru; Editing by Pooja Desai)