Wall Street, and the White House, are braced for a grim inflation reading Thursday, but stellar corporate earnings could still give stock markets a boost heading into the final trading days of the week.
Updated at 8:46 am EST
U.S. equity futures turned lower Thursday, while Treasury bond yields jumped and oil crept back above the $90 per barrel mark, as investors sifted through a busy session of after-hours earnings and braced for today’s key inflation reading prior to the start of trading.
The inflation reading was, itself, even worse than expected, with headline CPI speeding to 7.5%, the fastest since 1982, with a big jump in both the month-over-month and year-over-year readings for core consumer prices.
A well-received auction of $37 billion in 10-year notes by the U.S. Treasury yesterday, which drew record demand for foreign investors and offered the highest yield — 1.904% — in nearly three years provided solid footing for the bond market in overnight trading ahead of today’s inflation reading, but 10-years jumped to 1.981% following the January CPI data.
The narrowing gap between 2-year and 10-year note yields, which is now only 53 basis points, is starting to worry fund managers looking to extend risk into the second half of the year.
The CME Group’s FedWatch tool is showing a 25% chance of a 50 basis point rate hike in March, up from just 7.3% at the beginning of the year. The Atlanta Federal Reserve’s GDPNow forecasting tool, a real-time benchmark, suggests U.S. economic growth has slowed to a 0.7% clip.
The White House, in fact, is braced for a “high year-over-year inflation rate”, Press Secretary Jen Psaki during her regular media briefing Wednesday. “But looking at that reading … leading outside forecasters continue to project that inflation is expected to decrease over the course and moderate over the course of this year.”
Oil prices are also a concern, with the Energy Department reporting the lowest levels of U.S. stockpiles since October 2018, a tally which, pared with record levels of overall product demand could bring global crude prices closer to the $100 mark by summer, a move which could choke off any hopes of a consumer lead advance for the U.S. economy.
WTI futures contracts for March delivery, the U.S. benchmark, were last seen 90 cents higher on the session at $90.56 per barrel. Brent contacts for April delivery rose 69 cents to $92.21 per barrel.
Still, with stronger-than-expected earnings from Disney, Uber and Mattel last night, and solid gains for stocks in Europe and Asia, Wall Street could still extend its weekly winning streak if today’s inflation reading offers few surprises.
Disney, Uber, Mattel, Inflation And Stock Markets – Five Things You Must Know
Futures tied to the Dow Jones Industrial Average are indicating a modest 110 point opening bell gain while those linked to the S&P 500 are priced for a 35 point decline. The tech-focused Nasdaq Composite futures are indicating a 190 point retreat.
Walt Disney (DIS) – Get Walt Disney Company Report shares surged 6.8%, adding around 70 points to the Dow’s pre-market move, after the media giant posted stronger-than-expected first quarter earnings, lead by impressive gains in subscriber growth for its streaming service.
Uber Technologies (UBER) – Get Uber Technologies, Inc. Report shares jumped 4.8% after the ride-sharing group posted stronger-than-expected fourth quarter earnings ahead of a key investor presentation later today in New York.
Mattel (MAT) – Get Mattel, Inc. Report shares, meanwhile, soared 7.8% as the toymaker blasted Street forecasts with its fourth quarter earnings and said demand would likely remain firm throughout the coming year.
Coca-Cola (KO) – Get Coca-Cola Company Report posted stronger-than-expected fourth quarter earnings, powered by solid gains for sports drinks sales and double-digit growth for the trademark Coca-Cola Zero Sugar brand.
PepsiCo (PEP) – Get PepsiCo, Inc. Report slipped 0.45% after stronger-than-expected fourth quarter earnings and plans for a $10 billion buyback and a dividend boost.
Twitter (TWTR) – Get Twitter, Inc. Report shares powered 2.8% higher after the micro-blogging website said it would buyback $4 billion in stock after posted softer-than-expected fourth quarter earnings.
In overseas markets, Europe’s Stoxx 600 was marked 0.1% lower in Frankfurt following the U.S. inflation data, while the region-wide MSCI ex-Japan index in Asia gained 0.72%.
