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Futures Pare Losses After Tame CPI Report

Futures pared their losses Wednesday after a tame inflation reading.

Consumer prices rose just 0.1 percentin May, despite the rise in gasoline prices, after a flat reading in April. Over the past 12 months, prices have fallen by 1.3 percent, the most since 1950, the Labor Department reported.

The reading came as a relief that inflation wasn't any worse last month, but some market pros said it's not current inflation that is worrisome — it's the potential for a surge in inflation over the next two years.

The more troubling data point this morning was mortgage applications, which fell 15.8 percentto 514.4 last week, the lowest in nearly seven months, as rising mortgage rates scared away some buyers.

And the trade deficit fell nearly 35 percent to $101.5 billion in the first quarter, the lowest since the fourth quarter of 2001 during the last recession.

Still to come: The Energy Department will release its weekly report on oil and gasoline inventories at 10:30 am.

Futures had started off the day on negative footing after FedExsaid its earnings outlook was lower than Wall Street anticipated.

FedEx disappointed traders even though the quarterly numbers actually beat analyst estimates. The company posted quarterly earnings of 64 cents per share against expectations of 51 cents.

But its outlook going forward was for earnings sharply lower than hopes. FedEx earnings are considered a bellwether for economic performance. Shares fell 2 percent in premarket trading.

Futures earlier had been slightly positive but pared gains after the FedEx news broke. The tech-heavy Nasdaq was not impacted as much and still indicated a positive open.

Elsewhere, President Obama is set to officially unveil his economic regulatory overhaul proposal at 12:50 pm New York time, though the details are already widely known. Nonetheless, the President's presentation will undoubtedly garner much of Wall Street's attention.

Obama told CNBC that the US is not in danger of over-regulating the economy, but some analysts think more regulation may not be the best course.

“We’re going to have a plethora of regulators in the US and in my own experience … that doesn’t really work particularly well,” Alastair Newton, senior political analyst from Nomura told CNBC.

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The tone for the U.S. stock market is still - at least in the short term - a negative one. The Dow has suffered consecutive triple-digit losses, with both the Dow and S&P 500 chalking up their biggest two-day declines since late March.

U.S. stock index futures trended slightly lower ahead of the open, with European stocks lower as well. Japan's Nikkei average did manage a gain of nearly 1 percent overnight.