US STOCKS-Wall St set to open lower after hot producer inflation data; Fed in focus

* Futures off: Dow 0.52%, S&P 500 0.54%, Nasdaq 0.54%

* Fed rate decision expected at 2 p.m. ET

* Lululemon drops 2%, sees 2026 earnings below estimates

* Crude prices reverse losses; Brent last up 4% (Updates before markets open)

By Johann M Cherian and Utkarsh Hathi

March 18 (Reuters) - Wall Street's main indexes were set to open lower on Wednesday after data showed producer prices rose more than expected in February, prompting investors to price out any expectations for an interest rate cut by the Federal Reserve this year.

A Labor Department report showed the Producer Price Index (PPI) rose 3.4% on an annual basis in February, compared with a 2.9% rise expected by economists polled by Reuters. Prices could accelerate further as the Middle East conflict boosts shipping and oil prices.

Traders now see the Fed lowering borrowing costs by at least 25 basis points in April 2027, compared with December 2026 seen before the report, according to LSEG-compiled data.

"This will be the third PPI in a row that has come above expectations and that further cements the idea that the Fed will not be cutting rates anytime soon," said Art Hogan, chief market strategist at B. Riley Wealth.

The spotlight will be on the Fed, which is expected to leave benchmark interest rates unchanged at the end of its two-day meeting at 2 p.m. ET.

The greater focus, however, will be on Chair Jerome Powell's remarks on how tariffs, higher energy costs triggered by the Middle East crisis and a weakening job market will influence monetary policy decisions later this year.

"With the Fed not knowing the duration of the war and therefore the impact on inflation and economic activity, I actually wouldn't be surprised if they decided not to issue the summary of economic projections," Hogan said.

Brent crude prices erased earlier losses and gained after an Iranian news agency reported that some facilities belonging to Iran's oil industry in South Pars and Asaluyeh were attacked.

Prices had eased earlier in the session following the resumption of crude exports from Iraq's Kirkuk fields.

Travel stocks such as Delta, American and Carnival slipped over 1% each, while energy companies Occidental and EQT were marginally higher.

At 8:58 a.m. ET, Dow E-minis were down 243 points, or 0.52%, and S&P 500 E-minis were down 36.25 points, or 0.54%. Nasdaq 100 E-minis were down 133.25 points, or 0.54%.

Wall Street's fear gauge, the CBOE VIX index, reversed early declines and spiked 1.15 points to 23.52.

The Middle East conflict has exacerbated volatility in global markets; however, U.S. stocks have been buoyed by a rebound in technology shares and on relief that the U.S. is a net energy exporter.

On Wednesday, shares of Micron gained 0.6% ahead of its earnings after the market close, while SanDisk (SNDK) added 1.8%.

Among others, Lululemon lost 2% after forecasting 2026 revenue and profit below analysts' estimates. The yoga-wear maker, which is in the middle of a proxy fight, appointed a former chief of Levi Strauss to the board.

Drone autonomy software company Swarmer (SWMR) surged 28%, a day after its Nasdaq debut.

Department store chain Macy's added 7.2% after saying the hit from import tariffs could ease in the second half of the year. (Reporting by Johann M Cherian and Utkarsh Hathi in Bengaluru; Editing by Anil D'Silva and Maju Samuel)