The major U.S. index futures are indicating a nearly flat start on Wall Street this Wednesday, with stocks likely to exhibit indecisiveness after the rally from the previous session.
Despite the release of the much-anticipated report on consumer price inflation for July by the Labor Department, futures held steady. The report revealed a 0.2 percent rise in the consumer price index for July, following a 0.1 percent decline in June, aligning with market expectations.
Core consumer prices, excluding food and energy, also saw a 0.2 percent increase in July, slightly up from June’s 0.1 percent rise, again matching economist forecasts.
Notably, the annual rate of consumer price growth decelerated slightly, from 3.0 percent in June to 2.9 percent in July—contrary to economists' expectations that it would remain unchanged. Core consumer price growth on an annual basis also saw a decrease, from 3.3 percent in June to 3.2 percent in July, in line with expectations.
This slow-down suggests that the Federal Reserve might be inclined to reduce interest rates in the upcoming month. However, following yesterday’s rally, traders might already perceive the likelihood of a rate cut as factored into market prices.
According to the CME Group's FedWatch Tool, there is currently a 56.6 percent chance that the Fed will lower interest rates by a quarter point, and a 43.5 percent chance of a half-point reduction.
Traders might also be hesitant to make significant moves prior to Thursday’s flood of U.S. economic data, which includes reports on weekly jobless claims, retail sales, and industrial production.
After an underwhelming start to the week, stocks saw sharp gains on Tuesday, with major averages showing strong upward movement. This surge followed a mixed close on Monday.
The major averages rode their momentum into the close, ending the session near their highs. The Nasdaq soared by 407.00 points, or 2.4 percent, to 17,187.61. The S&P 500 surged 90.04 points, or 1.7 percent, to 5,434.43, and the Dow climbed 408.63 points, or 1.0 percent, to 39,765.64.
Tuesday's rally was driven by a Labor Department report indicating a slight uptick in producer prices for July. The producer price index for final demand inched up 0.1 percent in July, following a 0.2 percent rise in June, in line with economist predictions.
The report underscored that the annual rate of producer price growth slowed significantly, from an upwardly revised 2.7 percent in June to 2.2 percent in July. Economists had anticipated a deceleration to 2.3 percent from the originally reported 2.6 percent.
This notable slowdown bolstered confidence in the prospect of the Federal Reserve reducing interest rates at its upcoming policy meeting.
"The PPI data this morning came in lower than expected across the board, which is reassuring for investors worried about persistent inflation potentially inhibiting the Fed from lowering rates," commented Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance. "If tomorrow's CPI report echoes today's PPI results, the Fed could very well cut rates by 50 basis points at their next meeting to quickly return to a neutral stance amidst looming economic slowdowns," he added.
Semiconductor stocks significantly outperformed the market on Tuesday, driving the Philadelphia Semiconductor Index up by 4.2 percent. Computer hardware stocks also showed substantial gains, pushing the NYSE Arca Computer Hardware Index up by 3.2 percent.
Housing stocks saw a significant increase, with the Philadelphia Housing Sector Index posting a 1.7 percent gain. Stocks in the software, airline, and pharmaceutical sectors also moved notably higher, whereas energy stocks underperformed against a backdrop of a sharp fall in crude oil prices.
### Commodity and Currency Markets
Crude oil futures are inching up by $0.12 to $78.47 per barrel, following a $1.71 tumble to $78.35 per barrel on Tuesday. Gold is trading at $2,505 an ounce, down $2.80 from the previous session’s close of $2,507.80. On Tuesday, gold edged up by $3.80.
On the currency front, the U.S. dollar is trading at 147.34 yen, up from 146.84 yen at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1015, up from $1.0993 the previous day.
### Asia
Asian stocks displayed mixed results on Wednesday, influenced by subpar Chinese bank lending data and MSCI’s decision to reduce Chinese stocks in its indexes, which negated positive signals of cooling U.S. inflation.
The dollar index remained steady near a four-month low in Asian trading. Gold experienced a slight uptick, while Treasuries showed minimal movement ahead of the imminent U.S. Consumer Price Index (CPI) report, which could prompt the Federal Reserve to ease policy in September.
Oil prices saw a rebound due to indications of falling U.S. inventories and ongoing tensions in the Middle East.
China’s Shanghai Composite Index declined by 0.6%, closing at 2,850.65, ahead of critical retail sales, home prices, and industrial production data expected on Thursday, which might reveal continued economic struggles.
Hong Kong’s Hang Seng Index dropped 0.4% to 17,113.36, retracing from a two-week high as investors awaited Tencent Holdings Ltd.'s earnings and share-purchase plans.
Japanese markets showed gains, and the yen stabilized following Prime Minister Fumio Kishida’s announcement of not seeking re-election, potentially opening the door for new leadership in September. The Nikkei 225 Index increased by 0.6% to 36,442.43, while the Topix Index saw a 1.1% rise to 2,581.90, spurred on by insurance, nonferrous metal, and rubber product sectors.
In Seoul, stocks climbed for the fourth consecutive day due to optimism that the Fed might soon reduce interest rates. The Kospi Index rose by 0.9% to 2,644.50, led by the tech and battery sectors. Samsung Electronics surged by 1.5%, SK Hynix jumped 2.6%, and LG Energy Solution climbed 2.3%, mirroring Tesla’s gains.
Australian markets recorded modest gains, with sectors such as healthcare, IT, and real estate leading the upward trend. The S&P/ASX 200 Index nudged up by 0.3% to 7,850.70, and the All Ordinaries Index finished 0.4% higher at 8,070.20.
In New Zealand, the S&P/NZX-50 Index rallied by 2.1% to 12,572.53 following the central bank’s decision to cut the benchmark rate for the first time since March 2020, with additional cuts anticipated in the coming months.
**Europe**
European stocks advanced on Wednesday as investors digested data revealing the euro area economy grew by 0.3% in the three months leading to June 2024, consistent with initial estimates. However, Eurozone industrial production fell by 0.1% month-on-month in June, contrary to expectations of a 0.4% rise.
The British pound weakened against major currencies after July inflation data from the Office for National Statistics showed a softer than expected increase. The U.K. consumer price index rose by 2.2% in July year-on-year, following a 2.0% increase in June. Despite the slight acceleration in inflation, it was slower than the anticipated 2.3%, fueling speculation of further interest rate cuts by the Bank of England.
In European markets, the FTSE 100 Index increased by 0.3%, the French CAC 40 Index rose by 0.5%, and the German DAX Index advanced by 0.6%.
In corporate news, UBS shares surged after the Swiss bank reported a $1.1 billion net profit last quarter, significantly exceeding analyst expectations. Straumann Holding’s shares soared as the dental implant maker raised its guidance for 2024 and announced the sale of its DrSmile aligner business.
Flutter Entertainment saw a sharp rise in London, driven by better-than-expected second-quarter results and an improved full-year outlook.
Rheinmetall AG’s shares increased after the German automotive and arms manufacturer announced a deal to acquire Loc Performance Products, LLC, a notable vehicle specialist from Michigan, with an enterprise value of $950 million.
Conversely, Balfour Beatty’s shares tumbled despite reporting higher earnings for the first half of the year. Insurer Aviva also posted declines despite a favorable 14% increase in first-half operating profit. ThyssenKrupp's shares slumped after the company swung to a net loss in the third quarter and reduced its profit forecast for the third time this year. Energy group RWE declined as earnings dropped by nearly one-third in the first half of 2024 compared to the previous year.
**U.S. Economic Reports**
A much-anticipated report from the Labor Department revealed that U.S. consumer prices rose in line with estimates for July.The Labor Department has reported that the consumer price index (CPI) increased by 0.2% in July, following a slight decline of 0.1% in June. This modest rise in consumer prices was in line with market expectations.
Similarly, core consumer prices, which exclude the volatile food and energy sectors, also rose by 0.2% in July, after a 0.1% increase in June. The rise in core consumer prices matched economist predictions as well.
The report also noted a marginal slowdown in the annual rate of consumer price growth, which eased to 2.9% in July from 3.0% in June. Economists had anticipated the annual growth rate to remain steady.
The annual rate of core consumer price growth also saw a slight decline, dipping to 3.2% in July from 3.3% in June, aligning with forecasts.
At 10:30 AM ET, the Energy Information Administration is set to release its weekly report on oil inventories for the week ending August 9th. Crude oil inventories are projected to decrease by 2.0 million barrels, following a reduction of 3.7 million barrels in the previous week.
**Stocks in Focus**
Shares of Kellanova (K) are experiencing a significant pre-market surge after the food manufacturer announced its acquisition by snack giant Mars for $83.50 per share in cash. The total transaction value amounts to $35.9 billion, including assumed net leverage.
FanDuel parent company Flutter (FLUT) is also seeing substantial pre-market gains after posting better-than-expected second-quarter results and raising its full-year guidance.
Conversely, shares of Brinker International (EAT) are likely to face downward pressure. The operator of restaurant chains Chili's Grill & Bar and Maggiano's Little Italy reported weaker-than-expected fiscal fourth-quarter earnings and provided a 2025 earnings forecast that falls short of analyst estimates.
