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Updates before markets open

By Shashwat Chauhan and Sukriti Gupta

Feb 12 (Reuters) - Wall Street's main indexes were set to drop at the open on Wednesday, as a hotter-than-anticipated inflation reading added to concerns that the Federal Reserve would not cut interest rates anytime soon.

A Labor Department report showed the consumer price index rose 3% on an annual basis in January, versus the 2.9% increase forecast by economists polled by Reuters. On a monthly basis, the index rose 0.5%, compared with an estimated 0.3% rise.

The core figure, which excludes volatile food and energy components, rose 0.4% on a monthly basis against an expectation of a 0.3% advance. Annually, it came in at 3.3%, versus an estimated 3.1% increase.

"It's now calling into question not only whether or not the Fed will cut in the second half of this year ... but now it puts on the table potentially the next move even being one to the upside for rates," said Alex Coffey, senior trading strategist at Charles Schwab.

"It brings all options back to the table and likely pushes out even further that discussion of rate cuts."

Traders are now fully pricing in just one more 25 basis point rate reduction this year. Before the data, they saw an about 40% chance of another similar-sized move, as per LSEG data.

Fed Chair Jerome Powell also begins his second day of testimony before Congress shortly after trading commences on Wednesday.

On Tuesday, Powell had reiterated that the U.S. central bank is in no rush to cut its short-term interest rate again, while refraining from commenting on the impact of U.S. President Donald Trump's tariff policies.

January's reading is the last inflation reading before any direct impact from Trump's tariff measures, which went into effect this month.

Trump had slapped an additional 10% tariff on Chinese goods last week and levied tariffs on all steel and aluminum imports on Monday.

His trade advisers are also finalizing plans for the reciprocal tariffs on every country that charges duties on U.S. imports.

The yield on the 10-year Treasury note US10YT=RR rose sharply after the data, touching its highest level in over two weeks.

At 8:46 a.m. ET, Dow E-minis 1YMcv1 were down 408 points, or 0.91%, S&P 500 E-minis EScv1 were down 58 points, or 0.96% and Nasdaq 100 E-minis NQcv1 were down 223 points, or 1.02%.

Futures for economically-sensitive Russell 2000 smallcap index RTYcv1 dropped 1.6%.

Among individual movers, Lyft LYFT.O dropped 13.1% after the ride-hailing company forecast current-quarter gross bookings below estimates. Bigger rival Uber UBER.N also fell 2.5%.

Super Micro Computer SMCI.O advanced 11.1% after the server maker said it believes it will be able to file delayed annual and quarterly reports with the U.S. Securities and Exchange Commission by February 25.

CVS Health CVS.N advanced 9.6% after the healthcare conglomerate beat fourth-quarter profit estimates, while DoorDash DASH.O gained 5% as the online delivery firm topped analysts' estimate for quarterly revenue and total orders.

(Reporting by Shashwat Chauhan and Sukriti Gupta in Bengaluru; Editing by Maju Samuel)

((Shashwat.Chauhan@thomsonreuters.com;))