Inflation Data May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Thursday, with renewed inflation concerns likely to weigh on Wall Street following the release of a report showing a bigger than expected increase in producer prices.

The futures came under pressure after the Labor Department said its producer price index for final demand climbed by 0.7 percent in January after edging down by a revised 0.2 percent in December.

Economists had expected producer prices to increase by 0.4 percent compared to the 0.5 percent drop originally reported for the previous month.

Meanwhile, report said the annual rate of produce price growth slowed to 6.0 percent in January from 6.5 percent in December. The year-over-year growth was expected to slow to 5.4 percent.

Following the consumer price inflation and retail sales data released earlier this week, the report may add to worries about the outlook for interest rates.

Traders have recently expressed concerns the Federal Reserve will raise rates higher than currently anticipated in an effort to combat inflation.

After an initial move to the downside, stocks regained ground over the course of the trading session on Wednesday. The major averages climbed well off their worst levels of the day and eventually closed in positive territory.

The major averages all finished the day higher, with the tech-heavy Nasdaq leading the advance. While the Nasdaq jumped 110.45 points or 0.9 percent to 12,070.59, the S&P 500 rose 11.47 points or 0.3 percent to 4,147.60 and the Dow inched up 38.78 points or 0.1 percent to 34,128.05.

The early weakness on Wall Street reflected ongoing concerns about the outlook for interest rates following the release of upbeat retail sales data.

Before the start of trading, the Commerce Department released a report showing a substantial increase in U.S. retail sales in the month of January.

The report said retail sales spiked by 3.0 percent in January after tumbling by 1.1 percent in December. Economists had expected retail sales to jump by 1.8 percent.

Excluding a surge in sales by motor vehicle and parts dealers, retail sales still shot up by 2.3 percent in January after falling by a revised 0.9 percent in December.

Ex-auto sales were expected to increase by 0.8 percent compared to the 1.1 percent slump originally reported for the previous month.

The sharp increase in retail sales has led to concerns the Federal Reserve will be encouraged to continue aggressively raising interest rates in an effort to combat inflation.

“The data-dependent Fed is seeing its case for more ongoing rate increases get bolstered after both inflation accelerated and as retail sales rebound sharply in January,” said Edward Moya, senior market analyst at OANDA.

The concerns about rates may have been partly offset by a separate report from the Federal Reserve showing U.S. industrial production was unexpectedly unchanged in month of January.

The report said industrial production was unchanged in January after slumping by a revised 1.0 percent in December.

Economists had expected industrial production to climb by 0.5 percent compared to the 0.7 percent decrease originally reported for the previous month.

Tobacco stocks showed a strong move to the upside on the day, driving the NYSE Arca Tobacco Index up by 1.2 percent.

Considerable strength also emerged among networking stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Networking Index.

On the other hand, substantial weakness remained visible among gold stocks, dragging the NYSE Arca Gold Bugs Index down by 2.5 percent. The sell-off by gold stocks came amid a steep drop by the price of the precious metal.

Energy stocks also saw notable weakness as the price of crude oil climbed off its worst levels of the day but still closed in negative territory.

Commodity, Currency Markets

Crude oil futures are edging down $0.05 to $78.54 a barrel after falling $0.47 to $78.59 a barrel on Wednesday. Meanwhile, after tumbling $20.10 to $1,845.30 an ounce in the previous session, gold futures are inching up $1.70 to $1,847 an ounce.

On the currency front, the U.S. dollar is trading at 134.26 yen versus the 134.16 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0670 compared to yesterday’s $1.0689.

Asia

Asian markets gained on Thursday amidst global bullish sentiment on stocks and other risk assets. Sentiment was boosted by the promise of more stimulus measures from China. Chinese benchmarks, however, pared gains.

China’s Shanghai Composite Index slumped 31.46 points or 1.0 percent to 3,249.03. The day’s trading ranged between 3,231.34 and 3,308.83. The Shenzhen Component Index tumbled 156.98 points or 1.3 percent to close at 11,907.40.

The Japanese benchmark Nikkei 225 Index gained 194.58 points or 0.7 percent to end trading at 27,696.44. The day’s trading range was between 27,597.12 and 27,727.66.

Mitsubishi Motors and Nissan Motor rallied more than 4 percent. Mazda Motor also added 3.7 percent. Kansai Electric Power and NTN Corp. also jumped more than 3 percent.

Sapporo Holdings shed 3.6 percent. Aozora Bank, Pacific Metals Co., Chiba Bank and Shinsei Bank all lost more than 1 percent.

The Hang Seng Index of the Hong Kong Stock Exchange advanced 175.50 points or 0.8 percent from the previous close to finish trading at 20,987.67. The day’s trading range was between a high of 21,306.54 and a low of 20,887.70.

The Korean Stock Exchange’s Kospi Index surged 47.58 points or 2.0 percent to close trading at 2,444.06. The day’s trading range was between 2,442.07 and 2,475.99.

Australia’s S&P/ASX200 Index closed trading at 7,410.30 after gaining 58.10 points or 0.8 percent amidst jobs data that showed unemployment unexpectedly spiked to 3.7 percent, prompting bets of lower-than-expected rate hikes by the RBA. The day’s trading was between 7,351.40 and 7,422.00.

Packaging products business Orora surged 14.8 percent, closely followed by Sonic Healthcare, which added 14.2 percent. Corporate Travel Management rebounded close to 10 percent. Fintech firm Block gained 9.3 percent whereas semiconductor business Brainchip Holdings rebounded 8.8 percent.

AMP plunged 13 percent. Energy business New Hope Corporation, Pro Medicus and Origin Energy all declined more than 3 percent. Northern Star Resources also dropped almost 3 percent.

Europe

European stocks are broadly higher on Thursday as investors continue to shrug off concerns about interest rates and indulge in some buying.

While the French CAC 40 Index is up by 0.8 percent, the German DAX Index is up by 0.2 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

With the gains, the DAX Index has hit a new one-year high, while the FTSE 100 Index and CAC 40 Index have set new record highs.

In the U.K. market, Centrica moving sharply higher after the company said it would extend its share buyback program by 300 million pounds.

Standard Chartered is also strong a strong move to the upside after the lender announced a new $1 billion share buyback. The bank also reported a 28 percent surge in annual pretax profit.

In Paris, Orange is surging on strong results. Pernod Ricard has also moved notably higher, riding on upbeat earnings announcement.

In the German market, Adidas, Deutsche Bank, Puma, Symrise and Continental are posting strong gains. BASF and Siemens Energy are also notably higher.

U.S. Economic Reports

Producer prices in the U.S. advanced by more than expected in the month of January, the Labor Department revealed in a report released on Thursday.

The Labor Department said its producer price index for final demand climbed by 0.7 percent in January after edging down by a revised 0.2 percent in December.

Economists had expected producer prices to increase by 0.4 percent compared to the 0.5 percent drop originally reported for the previous month.

Meanwhile, report said the annual rate of produce price growth slowed to 6.0 percent in January from 6.5 percent in December. The year-over-year growth was expected to slow to 5.4 percent.

First-time claims for U.S. unemployment benefits unexpectedly edged slightly lower in the week ended February 11th, according to a separate report released by the Labor Department on Thursday.

The report said initial jobless claims slipped to 194,000, a decrease of 1,000 from the previous week’s revised level of 195,000.

Economists had expected jobless claims to inch up to 200,000 from the 196,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average crept up to 189,500, an increase of 500 from the previous week’s revised average of 189,000.

A report released by the Commerce Department on Thursday showing new residential construction in the U.S. tumbled by much more than expected in the month of January.

The Commerce Department said housing starts dove by 4.5 percent to an annual rate of 1.309 million in January after plunging by 3.4 percent to a revised rate of 1.371 million in December.

Economists had expected housing starts to slump by 1.6 percent to an annual rate of 1.360 million compared to the 1.382 million originally reported for the previous month.

Meanwhile, the report said building permits inched up by 0.1 percent to an annual rate of 1.339 million in January after falling by 1.0 percent to a revised rate of 1.337 million in December.

Building permits, an indicator of future housing demand, were expected to jump by 1.5 percent to an annual rate of 1.350 million from the 1.330 million originally reported for the previous month.

Philadelphia-area manufacturing activity unexpectedly contracted at an accelerate rate in the month of February, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday.

The Philly Fed said its diffusion index for current activity plunged to a negative 24.3 in February from a negative 8.9 in January, with a negative reading indicating a contraction. Economists had expected the index to inch up to a negative 7.4.

Looking ahead, the Philly Fed said most of the survey’s future indicators were positive but low, suggesting tempered expectations for growth over the next six months.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes.

St. Louis Federal Reserve President James Bullard is due to give a presentation on the U.S. economy and monetary policy before a hybrid Greater Jackson County Chamber luncheon at 1:30 pm ET.

At 4 pm ET, Federal Reserve Board Governor Lisa Cook is scheduled to give welcome remarks before the Sadie Collective Research Reception.

Cleveland Federal Reserve President Loretta Mester is due to speak before the Financial Executives International Northeast Ohio Chapter at 6 pm ET.

Stocks In Focus

Shares of Roku (ROKU) are moving sharply higher in pre-market trading after the streaming device company reported a narrower than expected fourth quarter loss on revenues that exceeded analyst estimates.

Networking giant Cisco Systems (CSCO) may also see initial strength after reporting better than expected fiscal second quarter results and raised its full-year forecast.

Meanwhile, shares of Shopify (SHOP) are likely to come under pressure after the e-commerce company reported fourth quarter results that beat expectations but provided disappointing guidance.

Travel company Tripadvisor (TRIP) may also move to the downside after Bernstein downgraded its rating on the company’s stock to Market Perform from Outperform.