By
Steve Muchoki
April 16th, 2024
Stock futures remained largely unchanged even as investors await the July inflation report, which could affect September’s hike in interest rates.
Stock futures remain relatively unchanged early Wednesday ahead of a key July inflation report release later in the day. Futures tied to the Dow Jones Industrial Average (DJIA) and S&P 500 were flat at the start of the day. Meanwhile, the Nasdaq 100 futures were trading fractionally lower. This latest development comes on the heels of the third straight daily decline of the S&P 500 and the tech-heavy Nasdaq. The Nasdaq Composite dipped 1.19% to 12,493.93, leading declines following underwhelming revenue guidance from Micron, Novavax, and Upstart. Additionally, the Dow dropped 0.18%, or 58.13 points, to close at 32,774.41, while the S&P shed 0.42% to 4,122.47.
While investors brace for the incoming consumer price index (CPI) report, economists anticipate a slight inflation cool-off period. These economists point to the recent slippage in oil prices as the basis for their report estimations. Commenting on the optics of the July inflation report amid the stock futures’ temporary lull, Alan Ruskin, chief international strategist at Deutsche Bank wrote:
“In terms of reactions, the market will initially get more excited by a downside core CPI surprise than an upside surprise, especially as it relates to risk appetite. A downside surprise plays to ‘hopes’ that an oil/food commodities peak, plus slower demand, will filter quickly into US inflation data.”
Besides Impacting Stock Futures, July Inflation Report Could Also Have Other Ramifications
The incoming July report could confirm or dash investor hopes that the problem with increasing prices is over. However, many expect a favorable scenario to be the case because the alternative could spell steep repercussions for the markets. As Mark Zandi, chief economist at Moody’s Analytics, put it:
“Everyone is primed for reasonably good news, so it’s got to be good news. If it’s not as good as people think, it’s going to be unusually bad news.”
Furthermore, this report is likely to have a big impact on the Federal Reserve’s slated decision to hike interest rates again in September.
Economists predict that the CPI will rise by 0.2%, much lower than the 1.3% recorded in June. This means that the year-over-year (YoY) inflation pace will be 8.7%, also lower than June’s 9.1%. Without accounting for food and energy, the CPI is expected to rise by 0.5%, lower than June’s 0.7%. Also, YoY core inflation is expected at 6.1%, higher than the 5.9% seen in June.
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Amid anticipation for key US inflation numbers, European markets were mixed early Wednesday. The Stoxx 600 dipped 0.2% in early trade, with autos gaining 0.5% while healthcare slipped 0.6%.
Meanwhile, German final consumer price inflation for July was at 7.5% YoY and 0.9% monthly, according to official reports. These numbers are roughly in line with the general estimate.
Amid all these developments, Bitcoin (BTC) has been struggling to comfortably clear the $23K threshold. The leading crypto traded 3% lower midday yesterday and is changing hands a little above $23,000. Investors are still hoping that BTC would make a sustained run for 24K and subsequently clear the mark.