Tamer Than Expected Inflation Data Likely To Spark Rally On Wall Street

The major U.S. index futures are currently pointing to a sharply higher open on Thursday, with stocks likely to show a strong move back to the upside following the pullback seen in the previous session.

The futures soared following the release of a report from the Labor Department showing a smaller than expected monthly increase in consumer prices as well as a bigger than expected slowdown in the annual rate of price growth.

The Labor Department said its consumer price index rose by 0.4 percent in October, matching the increase seen in September. Economists had expected consumer prices to climb by 0.6 percent.

The annual rate of growth in consumer prices also slowed to 7.7 percent in October from 8.2 percent in September. The year-over-year increase was the smallest since January and came in below estimates for an 8.0 percent jump.

The report also showed core consumer prices, which exclude food and energy prices, edged up by 0.3 percent in October after advancing by 0.6 percent in September. Economists had expected core prices to rise by 0.5 percent.

The annual rate of growth in core prices also slowed to 6.3 percent in October from 6.6 percent in September, coming in below estimates for 6.5 percent growth.

The data suggests the Federal Reserve’s efforts to contain inflation are having an effect, reinforcing recent optimism the central bank will slow the pace of interest rate hikes as early as next month.

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

Stocks moved sharply lower during trading on Wednesday, giving back ground after closing high for three straight sessions. The major averages all showed significant moves to the downside, with the Dow pulling back off its best closing level in well over two months.

The major averages finished the session just off their worst levels of the day. The Dow tumbled 646.89 points or 2.0 percent to 32,513.94, the Nasdaq plunged 263.02 points or 2.5 percent to 10,353.17 and the S&P 500 dove by 79.54 points or 2.1 percent to 3,748.57.

The sharply pullback on Wall Street came as traders cashed in on recent strength in the markets amid lingering uncertainty about the results of the U.S. midterm elections.

Control of both houses of Congress remains up for grabs following yesterday’s elections, although Republicans are projected to earn a narrow majority in the House.

The performance by Republicans was not as strong as many had expected, with many candidates backed by former President Donald Trump underperforming.

It remains unclear which party will have a majority in the Senate, as key races in Georgia, Nevada and Arizona currently remain undecided.

Traders may also be moving money out of stocks ahead of tomorrow’s highly anticipated report on consumer price inflation, which could have a significant impact on the outlook for interest rates.

A slump by shares of Disney (DIS) also weighed on Wall Street, with the entertainment giant plunging by 13.2 percent to its lowest closing level in over two years.

The steep drop by Disney came after the company reported fiscal fourth quarter results that missed analyst estimates on both the top and bottom lines.

On the other hand, shares of Meta Platforms (META) surged by 5.1 percent after the Facebook parent announced plans to cut more than 11,000 jobs.

A steep drop by the price of crude oil contributed to substantial weakness among energy stocks following a report showing a much bigger than expected weekly increase in U.S. crude oil inventories.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plummeted by 5.6 percent, the NYSE Arca Oil Index dove by 4.4 and the NYSE Arca Natural Gas Index tumbled by 4.3 percent.

Significant weakness was also visible among networking stocks, as reflected by the 4.7 percent nosedive by the NYSE Arca Networking Index.

Computer hardware stocks also saw considerable weakness on the day, resulting in a 3.3 percent slump by the NYSE Arca Computer Hardware Index.

Tobacco, semiconductor and retail stocks also showed notable moves to the downside amid broad based selling pressure.

Commodity, Currency Markets

Crude oil futures are jumping $1.17 to $87 a barrel after plunging $3.08 to $85.83 a barrel on Wednesday. Meanwhile, after edging down $2.30 to $1,713.70 an ounce in the previous session, gold futures are surging $23.20 to $1,736.90 an ounce.

On the currency front, the U.S. dollar is trading at 143.58 yen versus the 146.47 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0132 compared to yesterday’s $1.0011.

Asia

Asian stocks tumbled on Thursday, as a surge in COVID-19 cases spurred lockdowns in the southern Chinese manufacturing hub of Guangzhou and uncertainty continued over the outcome of the U.S. midterm elections.

Pundits predicted a giant Republican wave, but it didn’t happen. Republicans closed in on House majority, while the Senate is still up for grabs.

A crash in the crypto market also dented investors’ appetite for riskier assets. The dollar lost some of its overnight gains and U.S. Treasury yields remained pressured ahead of the release of key U.S. inflation data later in the day that is expected to show some moderation in price growth.

Gold edged higher in Asian trading, while oil extended losses for a fourth day running on concerns that new COVID curbs in China, the world’s biggest crude importer, will impact fuel demand.

China’s Shanghai Composite Index slipped 0.4 percent to 3,036.16 amid growing concerns over an economic slowdown and strict anti-COVID policies.

Hong Kong’s Hang Seng Index ended down 1.7 percent at 16,081.04, falling for a third straight session amid an aversion to technology stocks.

Japanese shares fell as investors awaited U.S. inflation data for hints to the Fed’s rate outlook. The Nikkei 225 Index fell 1.0 percent to 27,446.10, while the broader Topix closed 0.7 percent lower at 1,936.66.

Market heavyweight SoftBank lost 2.7 percent and Uniqlo operator Fast Retailing gave up 1 percent. Honda Motor plummeted 4 percent despite posting a 16 percent increase in quarterly profit.

Seoul stocks snapped a four-day winning streak as investors watched the results of the U.S. midterm elections and ongoing volatility in the cryptocurrency markets. The Kospi slid 0.9 percent to 2,402.23.

Australian markets also snapped a four-session winning streak, as mining and energy stocks succumbed to selling pressure on growing concerns over China’s prolonged zero-COVID policy.

The benchmark S&P/ASX 200 Index dropped half a percent to 6,964.00, while the broader All Ordinaries Index fell 0.6 percent to 7,145.70.

Origin Energy shares soared 34.8 percent after the power producer and energy retailer backed an A$18.4 billion non-binding takeover bid from a consortium led by Canada’s Brookfield Asset Management.

Xero slumped 10.9 percent after reporting a wider loss for the first half of fiscal 2023 and replacing its CEO.

Perpetual jumped 14.8 percent after the investment fund and trustee group rejected a sweetened A$1.85 billion acquisition offer from EQT-owned Barings Private Equity Asia (BPEA) and Regal Partners.

Across the Tasman Sea, New Zealand’s benchmark S&P NZX-50 Index shed 0.5 percent to end at 11,091.93.

Europe

European stocks have moved sharply higher on Thursday, benefiting from a positive reaction to the tamer than expected U.S. inflation data.

While the French CAC 40 Index has surged by 1.6 percent, the German DAX Index is up by 1.3 percent and the U.K.’s FTSE 100 Index is up by 0.9 percent.

Drug maker AstraZeneca has shown a strong move to the upside after raising its full-year earnings growth forecast.

Continental AG shares have also rallied. The German automotive supplier and tire manufacturer maintained its fiscal 2022 forecast after reporting a loss in its third quarter.

Retailer WH Smith has also moved higher after it swung to a profit in FY22 and reinstated dividends.

Energy giant Centrica has also jumped after raising guidance and launching a £250 million share buyback.

Tate & Lyle has also advanced. The provider of food-and-beverage ingredients reported a rise in pre-tax profit for the first half and said it expects to meet full-year market expectations.

Knorr Bremse has also surged after the braking systems maker reported third quarter earnings that topped forecasts.

Allianz has also moved to the upside. The insurer resolved on a share buyback program after quarterly profit beat expectations.

Meanwhile, miners Anglo American and Antofagasta have moved fallen in London, as a surge in COVID-19 cases spurred lockdowns in the southern Chinese manufacturing hub of Guangzhou.

Crédit Agricole shares have also slumped. The French lender reported lower-than-expected revenue in the third quarter, hit by weaker trading income and withdrawals at asset manager Amundi.

Housing group LEG Immobilien has also plunged after lowering its profit forecast for this year.

U.S. Economic Reports

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

The report showed the consumer price index rose by 0.4 percent in October, matching the increase seen in September. Economists had expected consumer prices to climb by 0.6 percent.

The annual rate of growth in consumer prices slowed to 7.7 percent in October from 8.2 percent in September. The year-over-year increase was the smallest since January and came in below estimates for an 8.0 percent jump.

The Labor Department also said core consumer prices, which exclude food and energy prices, edged up by 0.3 percent in October after advancing by 0.6 percent in September. Economists had expected core prices to rise by 0.5 percent.

The annual rate of growth in core prices also slowed to 6.3 percent in October from 6.6 percent in September, coming in below estimates for 6.5 percent growth.

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

The Labor Department said initial jobless claims crept up to 225,000, an increase of 7,000 from the previous week’s revised level of 218,000.

Economists had expected jobless claims to inch up to 220,000 from the 217,000 originally reported for the previous month.

Meanwhile, the report said the less volatile four-week moving average edged down to 218,750, a decrease of 250 from the previous week’s revised average of 219,000.

At 9 am ET, Philadelphia Federal Reserve President Patrick Harker is scheduled to speak on the economic outlook before the Risk Management Association, Philadelphia Chapter.

Dallas Federal Reserve President Lorie Logan is due to speak before the Energy and the Economy: The New Energy Landscape conference at 9:35 am ET.

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

The Treasury is also due to announce the results of this month’s auction of $21 billion worth of thirty-year bonds at 1 pm ET.

At 1:30 pm ET, Kansas City Federal Reserve President Esther George is scheduled to speak before the Energy and the Economy: The New Energy Landscape conference.

New York Federal Reserve President John Williams is due to give honoree remarks before the Pace Celebrates Downtown Changemakers event organized by Pace University at 6:30 pm ET.

Stocks In Focus

Shares of ZipRecruiter (ZIP) are moving sharply higher in pre-market trading after the online jobs site operator reported better than expected third quarter results and raised its full-year guidance.

Electric vehicle maker Rivian (RIVN) is also likely to move to the upside after reporting a narrower than expected third quarter loss and stuck with its 2022 production target despite supply chain issues.

Meanwhile, shares of Bumble (BMBL) may come under pressure after the dating service operator reported third quarter earnings that exceeded estimates but provided disappointing guidance for the current quarter.