Futures Pare Losses as Fed Move Sinks In

Stock index futures are pointing to a lower open on Wall Street but were well off their lows as investors were only moderately shaken by a Federal Reserve move on its discount rate that did not seem a reaction to inflation fears.

The Fed's decision to hike the discount rate by a quarter of a percentage point to 0.75 percent is the main news investor are looking at, both in the U.S. and overseas. Though the Fed had signaled that such a move was on the horizon, the timing seems to have taken many by surprise.

Futures had been sharply lower earlier but eased as the market digested the Fed move, then were encouraged by a government report on consumer prices showing virtually no inflationary pressures.

The Commerce Department said prices rose just 0.3 percent but actually fell excluding volatile food and energy prices, the first time that has happened since 1982.

The reaction is threatening winning streaks that have seen the Dow and the S&P 500 gain ground for three straight sessions and the Nasdaq for five consecutive trading days.

Asian stocks closed down after the move, while European stocks were also slightly lower in mid-morning trade.

Federal Reserve officials have been quick to say that the discount rate hike is in no way an immediate precursor to a rise in the benchmark Fed Funds rate, with St. Louis Fed President Bullard and Atlanta Fed President Lockhart among those weighing in. The subject is likely to be broached once again by New York Fed President William Dudley, scheduled to speak at an economic conference in Puerto Rico at 8:15 am New York time.

The government is set to release January consumer price index data at 8:30 am, with economists looking for a rise 0.3 percent, following December's 0.1 percent gain. The core rate is forecast to rise 0.1 percent, which would be identical to the December reading.

Toyota shares continue to be in focus, as reaction comes in from around the world on CEO Akio Toyoda's decision to accept a Congressional invitation to testify to lawmakers on the automaker's recall problems.

Dell'safter-the-bell earnings disappointed investors despite beating consensus estimates. CBS also weighed in after the bell, matching estimates on the bottom line, with revenue numbers coming in above expectations.

A takeover deal is reportedly brewing in the oilfield services industry, with the Wall Street Journal reporting that Schlumberger is in advanced talks to buy Smith International.

- Written by Peter Schacknow, Senior Producer, CNBC Breaking News Desk.