Stocks on inflation watch

Investors appeared nervous early Wednesday, ahead of a key inflation reading.

About three hours before the open, Nasdaq and S&P futures were lower and pointing to a negative start on Wall Street.

Investors are awaiting the Consumer Price Index report, the government's key inflation reading, due out at 8:30 a.m. ET.

The overall CPI is forecast to be up 0.3%, according to economists surveyed by Briefing.com. So-called core CPI, which strips out volatile food and energy prices, is forecast to be up 0.2% in April. Both increases would match the gains seen in March.

At 10:30 a.m. ET comes the report on U.S. fuel inventories. Congress voted Tuesday in favor of measures aimed at stopping President Bush from continuing to fill the nation's Strategic Petroleum Reserve. But oil still hit a trading record of $126.98 during the trading session Tuesday before retreating to finish up $1.57 at $125.80.

In early electronic trading Wednesday oil prices retreated slightly, with a barrel of U.S. crude falling 29 cents to $125.51.

In major corporate news, Carl Icahn reportedly is considering the idea of launching a proxy fight for control of the board at Yahoo (YHOO, Fortune 500) after the company saw share prices plunge following the rejection of the takeover bid by Microsoft (MSFT, Fortune 500). Shares of Yahoo jumped in afternoon trading Tuesday, but they remain 7% below their level before the withdrawal of the Microsoft bid earlier this month.

Clear Channel (CCU, Fortune 500) agreed to a lower buyout offer from private equity firms late Tuesday as part of a settlement the radio broadcaster made with the banks financing the deal.

American International Group (AIG, Fortune 500) is due to hold its annual meeting today. CEO Martin Sullivan is under fire after the insurer posted heavy losses in the two most recent quarters. Former CEO Maurice "Hank" Greenberg, still the largest individual shareholder at AIG, pushed the world's largest insurer to postpone the meeting in a letter released Monday.

After the bell Tuesday, Applied Materials (AMAT, Fortune 500), the leading maker of equipment used by computer chipmakers, reported lower earnings and revenue as new orders in the period fell. Still, earnings excluding special items beat forecasts of analysts surveyed by earnings tracker Thomson First Call by a penny a share. But shares fell about 3% in after-hours trading.

Electronics and entertainment conglomerate Sony (SNE) reported a $277 million profit for the January-March quarter on Wednesday, marking a reversal from a year ago on losses. Shares closed up in Tokyo Wednesday ahead of the after-market report there.

Department store operator Macy's (M, Fortune 500) is due to report earnings before the U.S. market open.

In global trade, Japan's benchmark stock index rose to its highest level in four months. European stocks drifted in morning trading.