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U.S. equity futures extended declines Thursday, while the dollar tested a fresh five-month high against its global peers, as markets remain rattled by yesterday’s hotter-than-expected inflation report and the biggest bond market selloff in more than a year. 

Stocks ended sharply lower Wednesday, with the S&P 500 slumping nearly 50 points by the close of trading, following a March inflation report from the Commerce Department that showed faster-than-expected price pressures at both the headline and core level. 

The reading, the third consecutive month that showed inflation topping Wall Street forecasts, triggered a wholesale repricing in both the bond and interest-rate markets, with 10-year notes rising the most since September 2022 to end the session at 4.546%. 

Benchmark 2-year notes, which are the more sensitive to interest-rate changes, added 23 basis points (0.23 percentage point) to close at 4.956%. Traders reset expectations for Federal Reserve rate cuts amid concern that inflation pressures are likely to remain elevated well into the summer.

“Overall, the strong inflation data at a minimum takes the June rate cut off the table for the Fed and should force the Fed to go back to the drawing board with regards to their monetary policy ambitions for the year,” said Charlie Ripley, senior investment strategist for Allianz Investment Management in Minneapolis. 

“The next potential opportunity for a rate cut is likely not going to be until after the summer and given the trajectory of the economy, the uncertainty around monetary policy is going to remain high for the foreseeable future,” he added.

CME Group’s FedWatch is now pricing in just two rate cuts this year, with the first coming in September, a move that would mark the longest stretch from the last rate hike to the first rate cut on record.

The U.S. dollar index reflected that change with its biggest single-day gain in more than a year and was last marked 0.05% higher against its global peers at 105.292. That level was last seen in early November.

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Stocks look set for another leg lower at the start of trading, although investors are likely to first focus on the Commerce Department’s reading of factory-gate, or wholesale, inflation, expected at 8:30 a.m. U.S. Eastern Time. Weekly jobless claims data are due at the same time.

Futures contracts tied to the S&P 500, which is now down 1.78% for the quarter, suggest an opening-bell decline of around 17 points, with the Dow Jones Industrial Average called 120 points lower.

The tech-focused Nasdaq, meanwhile, is priced for a 40-point decline following last night’s 136-point slump. 

In other markets, global oil prices held onto the $90-per-barrel mark in overnight trading amid concern about an escalation of the military conflict in the Middle East. Bloomberg reported on April 10 that U.S. officials believed that an Iranian strike on Israeli targets was imminent.

Brent crude contracts for June delivery, the global pricing benchmark, were steady at $90.44 per barrel while WTI contracts for May slipped 51 cents to $85.70 per barrel.

In overseas markets, the European Central Bank will hold its April policy meeting later today in Frankfurt, with markets betting on no change to its key deposit rate but also expecting a hint towards rate cuts in June.

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The Stoxx 600 was marked 0.32% lower in midday trading, while the FTSE 100 fell 0.23% in London.

Overnight in Asia, Japan’s Nikkei 225 ended 0.35% lower as the yen drifted to a fresh 34-year low of 153.24 against the U.S. dollar, reviving speculation of government intervention into the currency markets.

The regionwide MSCI ex-Japan index, meanwhile, was marked 0.43% lower into the close of trading. 

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