Inflation Concerns May Lead To Continued Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to extend the pullback seen in the previous session.

Concerns about the impact of elevated inflation may weigh on the markets after the Labor Department released a report showing a bigger than expected increase in U.S. consumer prices in the month of October.

The report said the consumer price index jumped by 0.9 percent in October after rising by 0.4 percent in September. Economists had expected consumer prices to climb by 0.6 percent.

Excluding higher prices for food and energy, core consumer prices still increased by 0.6 percent in October after inching up by 0.2 percent in September. Core prices were expected to rise by 0.4 percent.

The Labor Department also said the annual rate of growth in consumer prices accelerated to 6.2 percent in October from 5.4 percent in September, reaching the highest level since November of 1990.

The annual rate of growth in core prices also accelerated to 4.6 percent from 4.0 percent, reflecting the biggest jump in prices since August of 1991.

The acceleration in the rate of consumer price inflation may raise concerns about the outlook for interest rates even though the Federal Reserve has signaled it will not be in a hurry to begin raising rates.

Meanwhile, a separate report released by the Labor Department showed another modest decrease in first-time claims for U.S. unemployment benefits in the week ended November 6th.

Jobless claims decreased for the sixth consecutive week, once again falling to their lowest level since hitting 256,000 in the week ended March 14, 2020.

After trending higher over the past several sessions, stocks gave back some ground during trading on Tuesday. The major averages pulled back off Monday’s record closing highs, although selling pressure remained relatively subdued.

The major averages climbed well off their worst levels of the day but still closed in negative territory. The Dow fell 112.24 points or 0.3 percent to 36,319.98, the Nasdaq slid 95.81 points or 0.6 percent to 15,886.54 and the S&P 500 dropped 16.45 points or 0.4 percent to 4,685.25.

The pullback on Wall Street partly reflected profit taking, as some traders cashed in on the recent strength in the markets.

The Nasdaq and the S&P 500 moved lower after closing higher for eleven and eight consecutive sessions, respectively.

Largely upbeat quarterly results contributed to the recent strength on Wall Street, although traders may be looking for the next catalyst as the earnings season starts to wind down.

Economic news may begin to attract increased attention, as investors try to gauge when the Federal Reserve will start to begin raising interest rates.

The Fed has announced plans to begin scaling back its asset purchases but signaled that it will not be in a hurry to raise rates.

On the U.S. economic front, the Labor Department released a report showing producer prices increased by slightly more than anticipated in the month of October.

The Labor Department said its producer price index for final demand advanced by 0.6 percent in October after climbing by 0.5 percent in September. Economists had expected another 0.5 percent increase.

Core producer prices, which exclude prices for food, energy, and trade services, rose by 0.4 percent in October after inching up by 0.1 percent in September. Core prices were expected to edge up by 0.2 percent.

Compared to the same month a year ago, producer prices in October were up by 8.6 percent, unchanged from the previous month.

Meanwhile, the report showed the annual rate of growth in core producer prices accelerated to 6.2 percent from 5.9 percent.

Steel stocks gave back ground after rallying on Monday following passage of the $1 trillion infrastructure bill. The NYSE Arca Steel Index fell by 1.4 percent after jumping by 2.6 percent on Monday.

Considerable weakness also emerged among transportation stocks, as reflected by the 1.4 percent drop by the Dow Jones Transportation Average.

Biotechnology stocks also showed a notable move to the downside on the day, dragging the NYSE Arca Biotechnology Index down by 1.4 percent.

On the other hand, housing stocks moved sharply higher over the course of the session, with the Philadelphia Housing Sector Index jumping by 2 percent to its best closing level in over five months.

Gold stocks also turned in a strong performance amid an uptick by the price of the precious metal, resulting in a 1.8 percent gain by the NYSE Arca Gold Bugs Index.

Commodity, Currency Markets

Crude oil futures are edging down $0.08 to $84.07 a barrel after surging $2.22 to $84.15 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,840.50, up $9.70 compared to the previous session’s close of $1,830.80. On Tuesday, gold crept up $2.80.

On the currency front, the U.S. dollar is trading at 113.42 yen compared to the 112.87 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1548 compared to yesterday’s $1.1593.

Asia

Asian stocks retreated on Wednesday after the latest data from China showed broad-based inflation pressure on both the production side and the consumer side.

China’s property woes also rattled investors ahead of highly anticipated U.S. consumer inflation data due out later in the day.

Chinese shares ended lower after the government reported a surge in inflation and property developer Fantasia Holdings said that it has received notices from certain lenders seeking repayment of loans that aren’t due.

The benchmark Shanghai Composite Index slipped 14.54 points, or 0.4 percent, to 3,492.46, while Hong Kong’s Hang Seng Index rose 188.48 points, or 0.8 percent, to 23,001.61.

Consumer prices in China were up 1.5 percent year-on-year in October, the National Bureau of Statistics said earlier today. That exceeded expectations for an increase of 1.4 percent following the 0.7 percent gain in September.

The bureau also said that producer prices jumped an annual 13.5 percent, exceeding forecasts for an increase of 12.4 percent following the 10.7 percent gain a month earlier.

Japanese shares ended lower for the fourth straight day as inflation worries mounted. The downside remained capped by expectations that Kishida’s government will launch a fresh round of stimulus to prop up the economy.

The Nikkei 225 Index dropped 178.68 points, or 0.6 percent, to 29,106.78, while the broader Topix closed 0.6 percent lower at 2,007.16.

Heavyweight SoftBank Group tumbled 3.7 percent, while Nissan Motor jumped 7.5 percent after tripling its annual net profit forecast. Toshiba rebounded 1.2 percent after losing 2.6 percent in the previous session on reports that the conglomerate will split into three firms.

Australian markets extended losses for a third straight session, dragged down by miners. The benchmark S&P/ASX 200 Index edged down 10.30 points, or 0.1 percent, to 7423.90, while the broader All Ordinaries Index ended down 18.90 points, or 0.2 percent, at 7.737.40.

Miners Rio Tinto, Fortescue Metals Group, South32 and BHP lost 2-3 percent as iron ore prices plunged. Energy stocks ended broadly lower despite oil prices rising sharply overnight. National Australia Bank surged 4.4 percent a day after delivering a better than expected full-year profit.

Seoul stocks tumbled amid concerns that rising price pressures may force the Fed to raise rates sooner than expected. The benchmark Kospi shed 32.30 points, or 1.1 percent, to settle at 2,930.17. Electric car battery maker LG Chem lost 3.9 percent and top carmaker Hyundai Motor gave up 2.1 percent.

Europe

European stocks are turning in a mixed performance on Wednesday, with fresh concerns about inflation and fears about liquidity woes spreading in China’s property sector weighing on the markets.

While the U.K.’s FTSE 100 Index has risen by 0.6 percent, the German DAX Index is down by 0.1 percent and the French CAC 40 Index is down by 0.3 percent.

Sportswear company Adidas has moved sharply lower. After posting third quarter sales slightly below expectations, the sportswear company pared its full-year sales and profit forecasts.

LEONI, a cable and harnessing manufacturing firm, has also slumped despite maintaining its full-year guidance.

Evotec SE has also fallen. The German biotechnology firm said it has reached additional program designations within its neuroscience collaboration with Bristol Myers Squibb resulting in payments of $40 million to the company.

Meanwhile, Infineon Technologies, a world leader in semiconductor solutions, has risen after posting higher profit and revenue in the fourth quarter of fiscal 2021.

British retailer Marks & Spencer has moved sharply higher as it raised its annual profit outlook for the second time in less than three months.

Ahold Delhaize, an operator of grocery stores in the United States and Europe, has also rallied after reporting strong third quarter results and raising its full-year earnings guidance.

Media firm ITV has also shown a strong move to the upside after the company said 2021 advertising revenue will hit record levels.

Alstom has also moved sharply higher after the train maker said it expects a progressive recovery of EBIT in fiscal 2021/22.

U.S. Economic Reports

The Labor Department released a highly anticipated report on Wednesday showing U.S. consumer prices increased by more than expected in the month of October.

The report said the consumer price index jumped by 0.9 percent in October after rising by 0.4 percent in September. Economists had expected consumer prices to climb by 0.6 percent.

Excluding higher prices for food and energy, core consumer prices still increased by 0.6 percent in October after inching up by 0.2 percent in September. Core prices were expected to rise by 0.4 percent.

The Labor Department also said the annual rate of growth in consumer prices accelerated to 6.2 percent in October from 5.4 percent in September, reaching the highest level since November of 1990.

The annual rate of growth in core prices also accelerated to 4.6 percent from 4.0 percent, reflecting the biggest jump in prices since August of 1991.

A separate report released by the Labor Department showed another modest decrease in first-time claims for U.S. unemployment benefits in the week ended November 6th.

The report said initial jobless claims edged down to 267,000, a decrease of 4,000 from the previous week’s revised level of 271,000.

Economists had expected jobless claims to dip to 265,000 from the 269,000 originally reported for the previous week.

Jobless claims decreased for the sixth consecutive week, once again falling to their lowest level since hitting 256,000 in the week ended March 14, 2020.

At 10 am ET, the Commerce Department is scheduled to release its report on wholesale inventories in the month of September. Wholesale inventories are expected to jump by 1.0 percent.

The Energy Information Administration is due to release its report on oil inventories in the week ended November 5th at 10:30 am ET.

Crude oil inventories are expected to increase by 1.9 million barrels after climbing by 3.3 million barrels in the previous week.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $25 billion worth of thirty-year bonds.

Stocks In Focus

Shares of Poshmark (POSH) are plummeted in pre-market trading after the online marketplace reported a wider than expected third quarter loss on revenues that missed analyst estimates and provided disappointing guidance.

Cryptocurrency exchange Coinbase (COIN) is also seeing significant pre-market weakness after reporting third quarter results that fell short of expectations on both the top and bottom lines.

On the other hand, shares of DoorDash (DASH) are likely to see initial strength after the food delivery company announced an agreement to acquire international delivery platform Wolt in a deal valued at about $8.1 billion.

Fast food chain Wendy’s (WEN) may also move to the upside after reporting better than expected third quarter results and increasing its share repurchasing authorization by $80 million.