Investors are looking for another sign of easing inflation pressures in the April CPI reading to tame the recent stock market rout on Wall Street.
Updated at 8:46 am EST
U.S. equity futures moved lower Wednesday after April inflation data showed a stubborn stickiness in core consumer price pressures, offsetting the impact of an easing in the headline reading, as investors searched for relief from the market’s ongoing weakness.
April inflation pressures were expected to have eased modestly from the early 1981 highs recorded over the month of March, although it remains to be seen as to whether that will signal both a peak in U.S. inflation pressures and change in Federal Reserve’s vow to bring consumer prices down through a series of interest rate hikes and bond sales that comprise the most aggressive central bank tightening in a generation.
Comments yesterday from Cleveland Fed President Loretta Mester, however, suggested that any change in strategy isn’t likely to come soon, as she told Yahoo Finance that the central bank wouldn’t rule out a 75 basis point rate hike “forever” and must remain committed to curbing the fastest inflation in 40 years.
The headline consumer price index for the month of April was estimated to have risen 8.3% from last year, down from the 8.5% pace in March, which was the fastest rate since December of 1981. On a monthly basis, inflation was up 0.3%, the BLS said, compared to the March surge of 1.2%
However, so-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.6% on the month, and 6.2% on the year
Inflation readings from both Germany and China earlier today also indicated faster readings for the world’s two biggest export economies, while European Central Bank President Christine Lagarde indicated that rate hikes from Frankfurt could come “a few weeks” after the wind-down of its bond purchases later this summer.
“The April CPI report will not change the near-term policy path (but) it will trigger press headlines about falling inflation, and that will be a big change,” said Ian Shepherdson of Pantheon Macroeconomics. “Fed officials will remain cautious, because they know the decline in inflation will slow in the third quarter.”
In other markets, the U.S. dollar index, which tracks the greenback against a basket of its global currency peers, fell 0.41% to 103.957 following the inflation data while benchmark 10-year Treasury note yields jumped to 3.042%
Oil moved higher ahead of the Energy Department’s weekly data release on crude stocks, with WTI futures for June delivery rising $3.16 to $102.92 per barrel.
Bitcoin prices were little-changed at $31,580 each despite an overnight plunge in the so-called stablecoin TerraUSD, also known as UST, which is designed to trade on a one-to-one basis against the U.S. dollar. The coin was last seen at around 40 cents, with founder Do Kwon urging players to “sit tight” as its designers formulated a rescue plan.
The CBOE’s VIX index, also known as Wall Street’s ‘fear gauge’, eased from the highest levels since early March, but was still notably elevated at 32.48 points in early-hours trading.
On Wall Street, futures contacts tied to the Dow Jones Industrial Average indicating a 135 point opening bell decline while those linked the S&P 500, which is down 16% for the year, are priced for a 25 point move to the downside. Futures linked to the tech-focused Nasdaq are looking at a 132 point opening bell gain.
In single-stock trading, Coinbase Global (COIN) shares plunged 20% after the cryptocurrency trading platform posted weaker-than-expected first quarter revenues and cautioned that activity would likely continue to slide amid the ongoing upheaval in digital currency markets.
Walt Disney Co. (DIS) – Get Walt Disney Company Report shares moved 0.35% lower ahead of the media and entertainment group’s second quarter earnings after the close of trading.
Philip Morris International (PM) – Get Philip Morris International Inc. Report shares were little-changed from last night’s close of $98.88 each after the maker of Marlboro cigarettes made a recommended offer of around $16 billion for Swedish Match (SWMAY) as the tobacco giant looks for smoke-free growth prospects in global nicotine markets.
