A person walks past the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., March 7, 2022.
A person walks past the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., March 7, 2022. Reuters / ANDREW KELLY

Wall Street's main indexes were set to open lower on Thursday after data showed consumer prices in February surged as expected, cementing the case for an interest rate hike by the Federal Reserve later this month.

The Labor Department's report showed consumer prices in February surged 7.9% year-on-year, the largest annual increase in 40 years.

While the numbers met expectations, investors feared that inflation would accelerate further in the coming months as Russia's war against Ukraine drives up the costs of oil and other commodities.

"The fear was that it was going to be worse than it came out to be. The situation with inflation is not going to change anytime soon," said Jimmy Lee, chief executive officer of Las Vegas-based asset manager Wealth Consulting Group.

"It's going to be trickier now in terms of how the Fed has to navigate inflation and oil prices are going to impact a lot of consumers."

All eyes are now on the Fed's March 15-16 policy meeting. Fed Chair Jerome Powell last week said he will back a quarter point rate increase when the U.S. central bank meets later this month and would be "prepared to move more aggressively" later if inflation does not abate as fast as expected.

Traders now see 95% probability of a 25-basis-point hike by the Fed in its March meeting. [IRPR]

Meanwhile, talks between Russia and Ukraine yielded no progress as the war entered the third week on Thursday, sending the CBOE volatility index higher after it fell for two straight days.

The S&P 500 posted its biggest one-day percentage gain since June 2020 on Wednesday, while the Nasdaq notched its biggest rise since March 2021 on boost from financials and tech stocks and as oil prices eased.

At 08:57 a.m. ET, Dow e-minis were down 399 points, or 1.2%, S&P 500 e-minis were down 51 points, or 1.19%, and Nasdaq 100 e-minis were down 204 points, or 1.49%.

Big banks fell, with Morgan Stanley down 1.4% in premarket trading. The S&P 500 banks index logged its best day since January 2021 in the previous session.

Megacap growth stocks Apple Inc, Microsoft Corp, Alphabet Inc, Meta Platforms and Tesla Inc slipped more than 1% each.

Shares of Amazon.com Inc jumped 4.0% after its board approved a 20-for-1 split of the e-commerce giant's common stock and authorized a $10 billion buyback plan.

Oilfield services firm Schlumberger and Halliburton rose 1.8% and 2.1%, leading gains in energy shares. [O/R]