Futures Move Higher Even As Inflation Data Exceeds Estimates

The major U.S. index futures are pointing to a higher open on Thursday, with stocks likely to move to the upside after ending the previous session slightly lower.

The futures recently moved to the upside even though a report from the Labor Department showed a bigger than expected increase in consumer prices in the month of May.

The Labor Department said its consumer price index rose by 0.6 percent in May after climbing by 0.8 percent in April. Economists had expected consumer prices to increase by 0.4 percent.

Excluding food and energy prices, core consumer prices climbed by 0.7 percent in May following a 0.9 percent advance in April. Core prices were also expected to rise by 0.4 percent.

The report also showed consumer prices in May were up by 5.0 percent compared to the same month a year ago, reflecting the biggest spike since August of 2008.

The annual rate of core consumer price growth also accelerated to 3.8 percent in May, which represents the biggest jump since June of 1992.

While the faster rate of inflation may lead the Federal Reserve to consider tightening monetary policy, traders remain optimistic about the economic outlook.

Adding to the positive sentiment about the economy, the Labor Department released a separate report showing another modest decrease in first-time claims for unemployment benefits.

The report showed initial jobless claims edged down to 376,000, a decrease of 9,000 from the previous week’s unrevised level of 385,000. Economists had expected jobless claims to dip to 370,000.

With the slight drop, jobless claims once again fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

U.S. stocks closed slightly lower on Wednesday as investors largely stayed cautious and refrained from making significant moves ahead of the highlight anticipated inflation data

Despite continued optimism about a strong economic rebound, the mood in the market was subdued due to concerns over rising inflation and fears about the Federal Reserve starting discussions on tapering its asset buying program sooner than expected.

Among the major averages, the Dow briefly emerged into positive territory around mid-morning after a weak start but faltered and languished in the red thereafter. The Nasdaq and the S&P 500 managed to hold in positive territory, moving in a tight range, but slipped in the closing minutes.

The Dow ended down by 152.68 points or 0.4 percent at 34,447.14. The S&P 500 closed lower by 7.71 points or 0.2 percent at 4,219.55, while the tech-laden Nasdaq edged down 13.16 points or 0.1 percent to 13,911.75.

Caterpillar (CAT), Boeing (BA), American Express (AXP), General Electric (GE), Home Depot (HD), JP Morgan Chase (JPM) and Nike (NKE) ended lower by 1 to 2.5 percent.

Merck (MRK) shares moved up by over 2 percent after the company announced that the U.S. government had agreed to buy about 1.7 million courses of the company’s experimental COVID-19 treatment, molnupiravir, for about $1.2 billion, if the drug meets regulatory approval.

Johnson & Johnson (JNJ), IBM (IBM), Amgen (AMGN), Microsoft (MSFT) and Apple (AAPL) closed with modest gains.

On the economic front, data from the Commerce Department showed wholesale inventories in the U.S. rose by 0.8 percent from a month earlier to $698.0 billion in April after seeing a 1.2 percent increase in the previous month.

Commodity, Currency Markets

Crude oil futures are rising $0.34 to $70.30 a barrel after edging down $0.09 to $69.96 a barrel on Wednesday. Meanwhile, after inching up $1.10 to $1,895.50 an ounce in the previous session, gold futures are falling $7.80 to $1,887.70 an ounce.

On the currency front, the U.S. dollar is trading at 109.69 yen versus the 109.63 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2191 compared to yesterday’s $1.2180.

Asia

Asian stocks ended mixed on Thursday as China and the United States held talks on economic issues for a third time in two weeks and U.S. President Biden revoked Trump-era bans on TikTok and WeChat.

All eyes were on the U.S. inflation data due later in the day, which could provide hints of the direction of the Fed’s economic diagnosis in the Federal Open Market Committee meeting next week.

Chinese shares gained ground after central bank Governor Yi Gang said inflation is “basically under control” and monetary policy would be kept steady.

The benchmark Shanghai Composite Index rose 19.46 points, or 0.5 percent, to 3,610.86, while Hong Kong’s Hang Seng Index ended marginally lower at 28,738.88.

Japanese shares rose as Nikkei reported the government is poised to launch a large scale economic stimulus package ahead of a planned snap general election in September.

The Nikkei 225 Index gained 97.76 points, or 0.3 percent, to settle at 28,958.56, while the broader Topix ended marginally lower at 1,956.73.

Shipping firm Nippon Yusen jumped 3.7 percent as the outlook for the industry remained supported by the reopening of economies in Europe and Asia.

Chugai Pharmaceutical rose over 1 percent and Ono Pharmaceutical advanced 1.5 percent after reports that they will receive government subsidies for their research on COVID-19 drugs. Eisai slumped 7 percent on profit taking after two days of strong gains.

Retail firm Kohnan Shoji soared 20 percent after City Index Eleventh disclosed that it owns more than a 5 percent stake in the firm.

Australian markets advanced as the Reserve Bank stressed that inflation is unlikely to reach its target until 2024. The benchmark S&P/ASX 200 Index rose 32.30 points, or 0.4 percent, to 7,302.50, while the broader All Ordinaries Index ended up 36.80 points, or 0.5 percent, at 7,558.80.

Healthcare stocks gained ground, with Resmed rallying 3.7 percent. Tech shares also surged, with Appen, Wisetech Global and Xero climbing 2-3 percent.

Energy stocks led losses as oil prices slipped on U.S. inventory data showing a surge in gasoline stocks. Oil Search tumbled 3.3 percent and Beach Energy gave up 1.5 percent.

Banks and miners ended on a mixed note. Austal lost 2.2 percent as regulator ASIC launched a civil action against the shipbuilder over the failure of disclosures.

Seoul stocks rebounded on the four witches’ day of options and futures. The Kospi average edged up 8.46 points, or 0.3 percent, to 3,224.64. Web service giant Kakao rallied 3.5 percent as a regulator gave preliminary approval for its insurance business.

Europe

European stocks are turning in a mixed performance as traders digest the U.S. inflation data as well as the European Central Bank’s latest monetary policy decision.

While the U.K.’s FTSE 100 Index is up by 0.2 percent, the German DAX Index is just below the unchanged line and the French CAC 40 Index is down by 0.2 percent.

The European Central Bank left its interest rates and asset purchases unchanged on Thursday, while policymakers weigh the prospect of tapering stimulus as the euro area economy revs up amid a rapid decline in the coronavirus infections and a faster vaccine roll-out.

The Governing Council, led by ECB President Christine Lagarde, left key interest rates unchanged and maintained the size of the pandemic emergency purchase programme, or PEPP, at EUR 1,850 billion.

Shares of French digital music company Believe are moving sharply lower on their first day of trading.

BT Group shares have jumped after U.S. firm Altice Group said it had taken a 12.1 percent stake worth about 2.2 billion pounds in the U.K.’s largest broadband and mobile operator.

Vehicle marketplace Auto Trader has also surged higher. The company gave an upbeat outlook after a tough year.

In economic news, U.K. house prices continued to increase in May driven by robust demand and shortfall of new instructions, survey results from the Royal Institution of Chartered Surveyors showed.

The house price balance rose to 83 percent in May from 76 percent in April. This was the fourth successive month in which upward pressure on house price seemingly intensified.

U.S. Economic Reports

A highly anticipated report released by the Labor Department on Thursday showed consumer prices in the U.S. increased by more than expected in the month of May.

The Labor Department said its consumer price index rose by 0.6 percent in May after climbing by 0.8 percent in April. Economists had expected consumer prices to increase by 0.4 percent.

Excluding food and energy prices, core consumer prices climbed by 0.7 percent in May following a 0.9 percent advance in April. Core prices were also expected to rise by 0.4 percent.

The report also showed consumer prices in May were up by 5.0 percent compared to the same month a year ago, reflecting the biggest spike since August of 2008.

The annual rate of core consumer price growth also accelerated to 3.8 percent in May, which represents the biggest jump since June of 1992.

A separate report from the Labor Department showed a modest decrease by first-time claims for U.S. unemployment benefits in the week ended June 5th.

The report showed initial jobless claims edged down to 376,000, a decrease of 9,000 from the previous week’s unrevised level of 385,000. Economists had expected jobless claims to dip to 370,000.

With the slight drop, jobless claims once again fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

The less volatile four-week moving average also dropped to its lowest level in over a year, falling by 25,500 to 402,500 from the previous week’s unrevised average of 428,000.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auction of twenty-year bonds.

The Treasury Department is also scheduled to announce the results of this month’s auction of $24 billion worth of thirty-year bonds at 1 pm ET.