Futures Fluctuating Following Highly Anticipated Inflation Data

The major U.S. index futures are currently pointing to a roughly flat open on Thursday, with stocks likely to show a lack of direction as traders digest the highly anticipated consumer price inflation data.

The futures have fluctuated following the release of the inflation data, which largely came in line with economist estimates.

The Labor Department said its consumer price index edged down by 0.1 percent in December after inching up by 0.1 percent in November. Economists had expected consumer prices to come in unchanged.

The report also showed the annual rate of consumer price growth slowed to 6.5 percent in December from 7.1 percent in November, in line with expectations. The annual growth was the slowest since October 2021.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in December following a 0.2 percent uptick in November. The increase matched economist estimates.

The annual rate of core price growth slowed to 5.7 percent in December from 6.0 percent in November. The year-over-year growth was also in line with expectations.

While the slower price growth may encourage the Federal Reserve to continue scaling back the pace of interest rate hikes, traders may feel the slowdown was priced into the markets with the upward trend seen in recent sessions.

The Labor Department also released a separate report showing first-time claims for U.S. unemployment benefits edged slightly lower in the week ended January 7th.

Stocks showed a strong move to the upside over the course of the trading session on Wednesday, extending the upward move seen on Tuesday. With the continued advance, the major averages reached their best closing levels in almost a month.

The major averages saw further upside going into the close, ending the day at their highs of the session. The Dow climbed 268.91 points or 0.8 percent to 33,973.01, the Nasdaq surged 189.04 points or 1.8 percent to 10,931.67 and the S&P 500 jumped 50.36 points or 1.3 percent to 3,696.61.

The continued strength on Wall Street partly reflected optimism about the highly anticipated consumer price inflation report due to be released on Thursday.

The report is expected to show a slowdown in the annual rate of consumer price growth and could have a significant impact on the outlook for interest rates.

“Stocks are drifting higher as optimism remains intact that a pivotal inflation report will continue to show disinflation trends remain in place,” said Edward Moya, senior market analyst at OANDA.

“For some traders, they feel confident that either we get a soft landing or a not too bad recession,” he added. “It might not be smooth sailing with across the board pricing declines with the December inflation report as core prices from a month ago might edge higher.”

Traders also looked to continue picking up stocks at relatively reduced levels following the considerable weakness seen last year.

Tech stocks have seen a notable benefit from bargain hunting, with the Nasdaq closing higher for the fourth consecutive session.

Interest rate-sensitive commercial real estate stocks moved sharply higher on the day, with the Dow Jones U.S. Real Estate Index soaring by 3.5 percent to its best closing level in well over three months.

Substantial strength was also visible among housing stocks, as reflected by the 2.6 percent spike by the Philadelphia Housing Sector Index. The index surged to a nine-month closing high.

Retail stocks also turned in a strong performance, resulting in a 2.5 percent jump by the Dow Jones U.S. Retail Index.

Software, chemical and transportation stocks also saw considerable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are jumping $1.29 to $78.70 a barrel after surging $2.29 to $77.41 barrel on Wednesday. Meanwhile, after inching up $2.40 to $1,878.90 an ounce in the previous session, gold futures are climbing $14.70 to $1,893.60 an ounce.

On the currency front, the U.S. dollar is trading at 130.25 yen versus the 132.45 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0768 compared to yesterday’s $1.0757.

Asia

Asian stocks surrendered early gains to end on a muted note on Thursday as investors awaited U.S. inflation data for December later in the day that might show price pressures eased from the previous month.

A higher-than-expected reading could force the Federal Reserve to keep raising interest rates at a sharp clip. The U.S. rate futures currently price in two 25-basis-point hikes in February and March.

Boston Federal Reserve bank leader Susan Collins remarked to the New York Times that she was in favor of raising interest rates to just above 5 percent this year.

Chinese shares fluctuated before ending on a flat note as a rally in heavyweight technology stocks ran out of steam and investors fretted about a surge in COVID-19 cases ahead of the weeklong Lunar New Year holidays starting on January 21.

Data released earlier today showed Chinese consumer price inflation increased slightly more than expected in December, while producer price inflation continued to fall, albeit at a slower pace, as the country relaxed most of its strict anti-COVID curbs.

Hong Kong’s Hang Seng Index rose 0.4 percent to 21,514.10, although losses by tech heavyweights Alibaba and Tencent limited the upside.

Japanese shares ended slightly higher as data showed the country logged a record-high current account surplus in November. The Nikkei 225 Index finished marginally higher at 26,449.82, while the broader Topix closed 0.4 percent higher at 1,908.18.

While a stronger yen weighed on exporters, banks rallied following a Yomiuri newspaper report that the Bank of Japan would review the side effects of massive stimulus at next week’s policy meeting.

Uniqlo parent Fast Retailing fell 2 percent, a day after announcing plans for wages hikes of as much as 40 percent.

Seoul stocks rose for a seventh straight day, with the Kospi finishing up 0.2 percent at 2,365.10 on hopes that cooling inflation could prod the U.S. Federal Reserve to go easy on its aggressive policy tightening.

Australian markets posted strong gains after data showed the trade surplus unexpectedly grew in November. The benchmark S&P/ASX 200 rallied 1.2 percent to 7,280.40, led by technology and financial stocks.

Energy stocks also surged as oil price held steady after a 3 percent gain on Wednesday. The broader All Ordinaries Index ended 1.1 percent higher at 7,489.90.

Europe

European stocks have moved mostly higher on Thursday amid optimism cooling inflation will lead to an end to Fed rate hikes this year. The markets have given back some ground following the release of the U.S. inflation data but currently remain positive.

While the German DAX Index is up by 0.3 percent, the French CAC 40 Index is up by 0.4 percent and the U.K.’s FTSE 100 Index is up by 0.5 percent.

Roche has edged higher after saying it had received European Commission approval for Xofluza in children aged one year and above.

Sports car manufacturer Porsche AG has also moved to the upside after reporting higher deliveries in fiscal 2022.

Telecom major Vodafone Group has jumped as it announced the appointment of Aldo Bisio as the Group Chief Commercial Officer, effective January 12, in addition to his current role as CEO of Vodafone Italy.

Hilton Food Group has also soared. After posting full-year results in line with expectations, the food packing business said it is well-placed given encouraging progress to pass through and mitigate inflationary cost increases.

On the other hand, Logitech, a Swiss manufacturer of software and computer peripherals, has plunged after cutting its sales outlook.

Sugar producer Suedzucker AG has also fallen despite reporting higher nine-month results and confirming its fiscal 2023 outlook.

U.S. Economic Reports

A highly anticipated report released by the Labor Department on Thursday showed a modest decrease in U.S. consumer prices in the month of December.

The Labor Department said its consumer price index edged down by 0.1 percent in December after inching up by 0.1 percent in November. Economists had expected consumer prices to come in unchanged.

The report also showed the annual rate of consumer price growth slowed to 6.5 percent in December from 7.1 percent in November, in line with expectations. The annual growth was the slowest since October 2021.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in December following a 0.2 percent uptick in November. The increase matched economist estimates.

The annual rate of core price growth slowed to 5.7 percent in December from 6.0 percent in November. The year-over-year growth was also in line with expectations.

The Labor Department also released a separate report showing first-time claims for U.S. unemployment benefits edged slightly lower in the week ended January 7th.

The report said initial jobless claims slipped to 205,000, a decrease of 1,000 from the previous week’s revised level of 206,000.

The dip surprised economists, who had expected jobless claims to rise to 215,000 from the 204,000 originally reported for the previous week.

With the modest decrease, initial jobless claims fell to their lowest level since hitting 190,000 in the week ended September 24th.

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

St. Louis Federal Reserve President James Bullard is due to speak and participate in a moderated conversation on the U.S. economy and monetary policy before a virtual Wisconsin Bankers Association Midwest Economic Forecast Forum at 11:30 am ET.

At 12:40 pm ET, Richmond Federal Reserve President Thomas Barkin is scheduled to speak before the Virginia Bankers Association/Virginia Chamber of Commerce Financial Forecast event.

The Treasury Department is due to announce the results of this month’s auction of $18 billion worth of thirty-year bonds at 1 pm ET.

Stocks In Focus

Shares of American Airlines (AAL) are seeing significant pre-market strength after the airline boosted its fourth quarter guidance.

Steel producer Cleveland-Cliffs (CLF) may also move to the upside after Morgan Stanley upgraded its rating on the company’s stock to Overweight from Equal-Weight.

Meanwhile, shares of KB Home (KBH) may come under pressure after the homebuilder reported weaker than expected fiscal fourth quarter results.

Brewer Anheuser-Busch InBev (BUD) is also seeing pre-market weakness after UBS downgraded its rating on the company’s stock to Sell from Buy.