September inflation data remains firmly in focus Thursday as stocks look to snap a six day losing streak.
U.S. equity futures powered higher Thursday, while the dollar held slipped back against its global peers and Treasury yields ticked lower ahead of what could be a crucial reading for September inflation in the world’s biggest economy.
Minutes from the Federal Reserve’s September policy meeting, where officials agreed to their third consecutive 75 basis point rate hike, revealed discussions that focused on the need to tame the fastest inflation in four decades even if it were to trigger a slowdown in broader economic growth.
However the minutes also suggested that Fed officials would be mindful of the impact of rate hikes on broader economic growth, with participants noting the need to ‘calibrate’ future rate hikes “with the aim of mitigating the risk of significant adverse effects on the economic outlook.”
The Fed’s determination in seeing through its inflation fight puts even more emphasis on today’s CPI reading, although the data is unlikely to provide clarity on the direction of consumer prices pressures heading into the final months of the year.
Analysts are expecting a mixed set of figures from the 8:30 am Eastern time data release, with headline inflation slowing to an annual pace of 8.1%, but showing a modest month-on-month increase thanks in part to rent and airline ticket price increase.
Core consumer prices, which strip out volatile costs such as food and energy, are likely to indicate the opposite: a faster year-on-year trend and slowing monthly components.
Investors, then, are likely to focus on the broader trends evident from today’s release, which appear to suggest that inflation is moderating — but only very slowly — from the June peak of 9.1%
The CME Group’s FedWatch tool still suggests at least an 86% chance of another jumbo hike next month, which would take the Fed Funds rate to a range of between 3.75% and 4%, although bets on smaller moves in December are also beginning to materialize.
The Fed’s reaction function remains the market’s most potent concern, regardless of today’s inflation headlines, even with bank earnings slated for Friday that are set to kick-off the third quarter reporting season.
Profits for S&P 500 companies are expected to grow by 4.1% to a collective $464 billion before rising modestly to around 5.2% over the final three months of the year, according to data from Refinitiv.
Central bank action remains pivotal for markets in Europe, as well, with traders focused on the Bank of England’s emergency bond buying program in Britain, which is set to conclude Friday, and the European Central Bank’s hawkish signaling on rates and quantitative tightening following the confirmation of the fastest rate for inflation in Germany in more than seven decades.
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500, which is riding a six day losing streak, are indicating a 40 point opening bell gain, while those linked to the Dow Jones Industrial Average are priced for a 330 point advance. Contracts tied to the tech-focused Nasdaq are indicating an 85 point gain.
Benchmark 10-year note yields eased to 3.874% in early New York trading while the dollar index, which tracks the greenback against a basket of its global peers, was marked 0.3% lower at 112.921.
Walgreens Boots Alliance (WBA) – Get Walgreens Boots Alliance Inc. Report shares surged 6.7% after it posted better-than-expected fourth quarter earnings while lifting its healthcare sales target for the coming fiscal year.
Applied Materials (AMAT) – Get Applied Materials Inc. Report shares slumped 1.5% after the semiconductor equipment maker cut its current quarter sales outlook following changes to U.S. rules on chip exports to China.
Delta Air Lines (DAL) – Get Delta Air Lines Inc. Report share surged 4.2% after the carrier posted modestly weaker-than-expected third quarter earnings, thanks in part to $35 million hit from Hurricane Ian, but forecast robust gains over the final months of the year amid an ongoing surge in domestic travel demand.
Taiwan Semiconductor Mfg. Co. Ltd., TSM the world’s biggest contract chipmaker and a lead supplier for Apple Inc. AAPL iPhones, posted its strongest quarterly profits in two years, but struck a downbeat note for the chip sector heading into 2023.
Overnight in Asia, the region-wide MSCI ex-Japan benchmark fell 1%, paced by declines for China-based tech stocks following new rules that restrict U.S. chip exports, while the Nikkei 225 was marked 0.6% lower on the session in Tokyo as the yen tested a fresh 24-year low of 146.79 against the U.S. dollar.
In Europe, the region-wide Stoxx 600 index was up 0.26% by mid-day trading in Frankfurt with Britain’s FTSE 100 trading 0.11% higher in London.
