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US stock futures are currently in a jittery state and could take further cues from the incoming latest inflation report.
Stock futures remained largely unchanged early Wednesday amid anticipation for June’s critical inflation report. Futures tied to the Dow Jones Industrial Average (DJIA) registered small gains, advancing 38 points, or 0.12%. In addition, the futures on the S&P 500 inched upward 0.12%, while Nasdaq 100 futures climbed 0.23%.
Stock Futures Aside, How Inflation Is Impacting CPI
In light of these developments, suggestions are high that June’s looming consumer price index (CPI) figures will rise 8.8% year-over-year. If this happens, the increase will translate to an even higher reading than May’s 8.6% climb, the largest for nearly 41 years since December 1981. Furthermore, economists also suggest that June’s headline CPI could mark the peak of inflation at the moment. This analysis considers the fall in the price of gasoline.
Commenting on the CPI situation, Lindsey Bell, chief markets and money strategist at leading digital financial services company Ally Financial Inc, said:
“The market is anticipating that June will be the new peak. The reading is likely to confirm what the jobs report on Friday told us – that the Fed will stick to their aggressive rate tightening timeline.”
Swirling expectations also suggest that the Federal Reserve may feel compelled to hike another 75 basis points during June’s meeting. Last month, the US central bank increased its benchmark interest rates by 0.75 to between 1.5% and 1.75. Such a fiscal decision represents the Fed’s most aggressive rate hike in twenty-eight years.
Meanwhile, core inflation, excluding gasoline and food, continues to cool down for the third consecutive month. June’s core CPI is expected to hit 5.7% from the 6% recorded in May. This would represent an 0.5% climb go from 6% in May to 5.7%, which reveals a 0.5% climb compared with May’s 0.6%. Before this, core CPI had peaked at 6.5% in March.
Fed Risks Triggering Full-scale Recession with Interest Rate Hikes, Some Analysts Suggest
As the Fed continues to tackle inflation numbers amid the stock market and futures performances, observers also note other macro-economic parameters. One of such parameters is the quarterly earnings report expected of several big business names this week. According to Andy Sparks, head of portfolio management research at MSCI, “the Fed’s credibility will be tested in coming months with the release of inflation numbers and corporate earnings.”
Sparks also adds that the Fed’s intent to contain inflation may invariably end up having a cataclysmic effect on the economy. As he explains:
“The Fed’s recent aggressive actions to bring down inflation also run the risk of overshooting, pushing an economy that had been showing signs of weakness into a full scale recession.”
Nonetheless, investors will continue to keep a close eye on this week’s corporate earnings as a measure of inflationary effects. Beverage giant PepsiCo (NASDAQ: PEP) already kicked off this week’s report with a strong showing. As a result, the New York-headquartered company has raised its revenue outlook for the rest of the year.
Financial giants, like JPMorgan (NYSE: JPM), are also among those expected to post quarterly earnings this week.