Inflation Data May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground after ending the previous session modestly higher.

Traders may cash in on recent strength in the markets after a report from the Labor Department showed consumer prices in the U.S. saw the biggest monthly increase in thirteen years in the month of June.

The Labor Department said its consumer price index jumped by 0.9 percent in June after climbing by 0.6 percent in May. Economists had expected consumer prices to rise by 0.5 percent.

The bigger than expected increase in consumer prices reflected the biggest advance since prices surged up by 1.0 percent in June of 2008.

Excluding food and energy prices, core consumer prices still jumped by 0.9 percent in June following a 0.7 percent increase in May. Core prices were expected to rise by 0.4 percent.

The annual rate of consumer price growth accelerated to 5.4 percent in June from 5 percent in May, reaching the highest level since a matching spike in August of 2008.

Core consumer prices were up by 4.5 percent year-over-year in June, reflecting an acceleration from the 3.8 percent jump in May. Core prices saw the biggest annual increase since November of 1991.

The sharp increases in consumer prices may add to recent concerns about the outlook for monetary policy and the possibility the Federal Reserve may soon begin its tapering its asset purchases.

On the earnings front, financial giants JPMorgan Chase (JPM) and Goldman Sachs (GS) both reported quarterly results that exceeded analyst estimates on both the top and bottom lines.

Snack and beverage giant PepsiCo (PEP) also reported better than expected second quarter results and raised its full-year guidance.

After showing a lack of direction early in the session, stocks moved modestly higher over the course of the trading session on Monday. With the upward move, the major averages all reached new record closing highs.

The major averages all close in positive territory. The Dow climbed 126.02 points or 0.4 percent to 34,996.18, the Nasdaq edged up 31.32 points or 0.2 percent to 14,733.24 and the S&P 500 rose 15.08 points or 0.4 percent to 4,384.63.

The modestly higher close on Wall Street reflected recent upward momentum, which has helped propel stocks to record highs despite uncertainty about the global economic outlook.

A lack of major U.S. economic data may kept traders on the sidelines, however, with traders looking ahead to the release of reports on consumer and producer price inflation, industrial production and retail sales in the coming days.

Congressional testimony by Federal Reserve Chair Jerome Powell is also likely to attract attention along with the Fed’s Beige Book.

Traders may also have been reluctant to make significant moves ahead of the start of earnings season, with several big-name companies due to report their quarterly results this week.

Semiconductor stocks showed a strong move to the upside on the day, driving the Philadelphia Semiconductor Index up by 1.2 percent.

Notable strength was also visible among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index rising by 1.2 percent and 1.1 percent, respectively.

On the other hand, gold, networking and biotechnology stocks moved notably lower on the day, limiting the upside for the broader markets.

Commodity, Currency Markets

Crude oil futures are rising $0.24 to $74.34 a barrel after falling $0.46 to $74.10 a barrel on Monday. Meanwhile, after slipping $4.70 to $1,805.90 an ounce in the previous session, gold futures are climbing $9.10 to $1,815 an ounce.

On the currency front, the U.S. dollar is trading at 110.44 yen compared to the 110.37 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1807 compared to yesterday’s $1.1861.

Asia

Asian stocks rose on Tuesday as upbeat Chinese trade data boosted hopes of a quick economic rebound from the pandemic in major Asian economies. Investors also awaited cues from a slew of central bank decisions due this week.

The Reserve Bank of New Zealand’s decision is due Wednesday, while the Bank of Korea and the Bank of Japan will announce their decisions on Thursday and Friday, respectively.

Chinese shares eked out modest gains as new data showed the country’s exports and imports grew at a much faster than expected pace in June. The benchmark Shanghai Composite Index ended up 18.69 points, or 0.5 percent, at 3,566.52.

Exports advanced 32.2 percent year-on-year in June, bigger than the economists’ forecast of 23.1 percent, official data showed. Likewise, imports climbed 36.7 percent on a yearly basis, faster than the expected rate of 30 percent.

Additional data, including Q2 GDP and industrial production figures, will be released on Thursday.

Hong Kong’s Hang Seng Index jumped 448.17 points, 1.6 percent, to 27,963.41 as tech stocks surged.

Japanese shares advanced on optimism over corporate earnings growth. The Nikkei 225 Index rose 149.22 points, or 0.5 percent, to 28,718.24, while the broader Topix gained 0.7 percent to close at 1,967.64, its highest close since June 16.

Shipping firms, securities brokerages and insurers topped the gainers list. Drugstore chain operator Cosmos Pharmaceutical jumped 9.3 percent and homebuilder Tama Home surged 17.6 percent after posting upbeat earnings.

Liquor store company Kakuyasu tumbled 3.3 percent as it withdrew its earnings outlook for the current year through March 2022.

Australian shares gave up early gains to end on a flat note amid lingering worries about the spread of the highly contagious coronavirus variants in New South Wales.

Miners extended gains from the previous session, with Rio Tinto rising 0.6 percent and Fortescue Metals Group climbing 2.1 percent. Banks ANZ, Commonwealth and Westpac fell between half a percent and 0.8 percent.

Nearmap soared 14.4 percent after the aerial imagery tech firm said it expects its fiscal 2021 contract value to beat the top end of its upgraded guidance. Other tech stocks finished broadly lower.

Youfoodz shares skyrocketed more than 77 percent after the ready-made meals provider received a 95 cents per share or $125 million bid from global food giant HelloFresh.

Seoul stocks extended gains for the second day on the back of upbeat Chinese trade data and expectations for strong corporate earnings both at home and abroad.

The Kospi climbed 24.91 points, or 0.8 percent, to 3,271.38 despite concerns about toughened social distancing measures in the greater Seoul area. Chipmaker SK Hynix rallied 2.5 percent, while internet portal operator Naver surged 5.4 percent.

Europe

European stocks are subdued on Tuesday as the global coronavirus caseload surged past 187 million and investors turn their focus to U.S. inflation data for June for additional cues about the likely timing of policy tightening by the Federal Reserve.

While the U.K.’s FTSE 100 Index is up by 0.2 percent, the French CAC 40 Index and the German DAX Index are both nearly unchanged.

ING has dropped. The Dutch bank has reached an agreement to transfer its Retail Banking operations in Austria to bank99, the bank of Österreichische Post, the Austrian postal services.

Finnish telecom equipment maker Nokia has jumped. Following a stronger than expected second quarter, the company said it will probably raise its guidance for the full year.

Banks have also gained ground in London as the Bank of England lifted the restrictions on dividend payouts that were introduced during the pandemic with immediate effect, citing the results of recent stress tests and lower-than-expected loan losses.

Miners Anglo American and Rio Tinto have also risen after data showed China’s exports grew much faster than expected in June.

Healthcare software and systems provider EMIS Group has also advanced. The company said that trading for the first half ended June 30 has been slightly ahead of its expectations.

Retirement group Phoenix has edged up slightly on news it would sell Ark Life Assurance Company to pensions group Irish Life for around £197m.

LVMH shares were little changed in Paris. Moët Hennessy, the Luxury Wines and Spirits Division of the luxury goods company, announced the formation of a 50/50 joint venture with Italian spirits company Campari Group to create a premium pan-European Wines & Spirits e-commerce player through Tannico.

Gerresheimer AG shares have slumped. The German drug delivery devices maker reported that its second-quarter net income attributable to shareholders was 28.13 million euros, slightly lower than last year’s 28.99 million euros.

In economic releases, German consumer price inflation eased in June for the first time in six months, the latest data from Destatis confirmed.

The consumer price index rose 2.3 percent year-on-year following a 2.5 percent increase in May, which was the highest rate in nearly a decade.

U.S. Economic Reports

Consumer prices in the U.S. saw the biggest monthly increase in thirteen years in the month of June, according to a report released by the Labor Department on Tuesday.

The Labor Department said its consumer price index jumped by 0.9 percent in June after climbing by 0.6 percent in May. Economists had expected consumer prices to rise by 0.5 percent.

The bigger than expected increase in consumer prices reflected the biggest advance since prices surged up by 1.0 percent in June of 2008.

Excluding food and energy prices, core consumer prices still jumped by 0.9 percent in June following a 0.7 percent increase in May. Core prices were expected to rise by 0.4 percent.

The annual rate of consumer price growth accelerated to 5.4 percent in June from 5 percent in May, reaching the highest level since a matching spike in August of 2008.

Core consumer prices were up by 4.5 percent year-over-year in June, reflecting an acceleration from the 3.8 percent jump in May. Core prices saw the biggest annual increase since November of 1991.

At 12 pm ET, Atlanta Federal Reserve President Raphael Bostic is due to give opening remarks before a virtual “Racism and the Economy: Focus on Criminal Justice” webinar.

Minneapolis Federal Reserve Bank President Neel Kashkari is scheduled to discuss “How Overrepresentation of People of Color and Indigenous People in the Criminal Legal System Compromises the Performance of the Overall Economy” before the virtual “Racism and the Economy: Focus on Criminal Justice” webinar at 12:45 pm ET.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $24 billion worth of thirty-year bonds.

Bostic is scheduled to participate in a “Reflections on the Criminal Legal System and the Economy” panel before the virtual “Racism and the Economy: Focus on Criminal Justice” webinar at 2:30 pm ET.

At 2:50 pm ET, Boston Federal Reserve President Eric Rosengren is due to give closing remarks before the virtual “Racism and the Economy: Focus on Criminal Justice” webinar.

Stocks In Focus

Shares of Nokia (NOK) are moving sharply higher in pre-market trading after the telecom equipment maker said it expects to revise upwards its prior outlook ranges for 2021.

Apparel producer Hanesbrands (HBI) may also see initial strength after Wells Fargo upgraded its rating on the company’s stock to Overweight from Equal Weight.

On the other hand, shares of Conagra (CAG) may move to the downside after the food producer reported better than expected fiscal fourth quarter results but lowered its guidance for fiscal 2022.