Tamer-Than-Expected Inflation Data May Lead To Strength On Wall Street

The major U.S. index futures are currently pointing to a notably higher open on Wednesday, with stocks likely to show a strong move to the upside after experiencing choppy trading to start the week.

The futures surged following the release of a highly anticipated Labor Department report showing a modest increase in U.S. consumer prices in the month of March.

The Labor Department said its consumer price index inched up by 0.1 percent in March after climbing by 0.4 percent in February. Economists had expected consumer prices to rise by 0.3 percent.

The report also showed the annual rate of consumer price growth slowed to 5.0 percent in March from 6.0 percent in February.

The year-over-year growth was slower than the 5.2 percent expected by economists and marks the smallest 12-month increase since May 2021.

The notable slowdown in the annual rate of growth may lead to optimism the Federal Reserve will hold off on raising interest rates again at its next meeting in early May.

Meanwhile, the report also said core consumer prices, which exclude food and energy prices, rose by 0.4 percent in March after advancing by 0.5 percent in February. The increase matched economist estimates.

The annual rate of growth by core consumer prices accelerated to 5.6 percent in March from 5.5 percent in February, which was also in line with expectations.

Later in the day, the Fed is due to release the minutes of its March monetary policy meeting, which may shed additional on the outlook for interest rates.

After ending Monday’s session little changed, the major U.S. stock indexes fluctuated over the course of the trading day on Tuesday before eventually closing mixed.

The major averages all came under pressure going into the close, although the Dow managed to end the day up 98.27 points or 0.3 percent at 33,684.79.

Meanwhile, the S&P 500 closed nearly flat, down just 0.17 points or less than a tenth of a percent at 4,108.94, while the tech-heavy Nasdaq fell 52.48 points or 0.4 percent to 12,031.88.

A lack of major U.S. economic data kept some traders on the sidelines ahead of the release of several key reports in the coming days.

Following this morning’s consumer price inflation data, reports on produce price inflation, retail sales and industrial production are also likely to attract attention.

Earnings news may also drive trading later in the week, with financial giants Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) due to report their quarterly results on Friday.

Despite the lackluster performance by the broader markets, airline stocks moved sharply higher on the day, driving the NYSE Arca Airline Index up by 3.4 percent.

The rally by airline stocks came after aerospace giant Boeing (BA) revealed it delivered 64 planes in the month of March, the most since December.

Optimism about additional stimulus from China also contributed to substantial strength among steel stocks, as reflected by the 3.1 percent surge by the NYSE Arca Steel Index.

Housing, oil service and banking stocks also saw considerable strength on the day, while weakness among software and networking stocks weighed on the Nasdaq.

Commodity, Currency Markets

Crude oil futures are climbing $0.74 to $82.27 a barrel after surging $1.79 to $81.53 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,038.60, up $19.60 compared to the previous session’s close of $2,019. On Tuesday, gold climbed $15.20.

On the currency front, the U.S. dollar is trading at 132.85 yen compared to the 133.68 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0974 compared to yesterday’s $1.0912.

Asia

Asian stocks eked out modest gains on Wednesday as investors awaited U.S. consumer price inflation data as well as Fed minutes from the March meeting for clues on the monetary path of the central bank.

Gold edged higher on dollar weakness and bond yields were relatively steady following mixed comments from Federal Reserve officials about further policy tightening.

While Chicago Fed President Austan Goolsbee argued the Fed should exercise “prudence and patience,” New York Fed President John Williams said officials have more work to do to tackle inflation.

Oil prices were slightly higher in Asian trading, adding to overnight gains after industry data showed crude inventories rose by about 380,000 barrels in the week ended April 7.

Chinese shares rose as data showed new bank lending in the country hit an all-time high in the first quarter. The benchmark Shanghai Composite Index climbed 0.4 percent to 3,327.18, while Hong Kong’s Hang Seng Index fell 0.9 percent to 20,309.86.

Seoul stocks ended higher for a fourth straight session, with Hyundai Motor, Kia Corp. and POSCO Holdings rising 1-3 percent. The Kospi finished 0.1 percent higher at 2,550.64 after choppy trading.

Japanese stocks advanced after Berkshire Hathaway chairman Warren Buffett said in an interview that he has raised his holdings in five Japanese trading houses.

Investors shrugged off data showing that Japanese core machinery orders fell 4.5 percent in February from the previous month.

The Nikkei 225 Index climbed 0.6 percent to 28,082.70, while the broader Topix closed 0.8 percent higher at 2,006.92.

Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. jumped 2-3 percent, lifted by Buffett’s strong message.

Construction machinery maker Komatsu rallied 3.3 percent after reporting a 4 percent increase in use of its equipment in China through March.

Australian markets closed higher for a second straight session, led by miners. The benchmark S&P/ASX 200 Index rose 0.5 percent to 7,343.90, marking its highest closing level since March 7. The broader All Ordinaries Index settled 0.5 percent higher at 7,538.90.

BHP, Rio Tinto and Fortescue Metals Group jumped 2-3 percent. Coal miner Whitehaven Coal tumbled 3.2 percent after cutting its 2023 production guidance.

Europe

European stocks have moved higher on Wednesday as stronger commodity prices on the back of a weaker dollar boost mining and energy stocks.

While the U.K.’s FTSE 100 Index has advanced by 0.6 percent, the French CAC 40 Index is up by 0.3 percent and the German DAX Index is up by 0.2 percent.

French central bank chief Francois Villeroy de Galhau on Tuesday said inflation in the eurozone is at risk of getting entrenched above 2 percent and that underlying inflation readings and the effectiveness of policy transmission will be the key factors in the next decisions.

Truck maker AB Volvo has soared after reporting record first-quarter profits on higher revenue and margins.

Deutsche Bank shares have also risen. The German bank is winding down its remaining software technology operations in Moscow and St Petersburg to end two decades of reliance on Russian IT expertise, the Financial Times reported.

Car manufacturer Mercedes Benz has also moved to the upside after sales rose moderately in the first quarter of this year.

Meanwhile, Merck has slumped. The German pharmaceutical company said the FDA has placed a partial clinical hold on the initiation of new patients on evobrutinib and patients with less than 70 days exposure to study medication in the U.S.

Petrofac has also plunged. The oilfield services provider said it expects to report a full year Group EBIT loss of about US$150 million to US$170 million for 2022, including an EBIT loss of about US$240 million to US$260 million in Engineering & Construction.

U.S. Economic Reports

A highly anticipated report released by the Labor Department on Wednesday showed a modest increase in U.S. consumer prices in the month of March.

The Labor Department said its consumer price index inched up by 0.1 percent in March after climbing by 0.4 percent in February. Economists had expected consumer prices to rise by 0.3 percent.

The uptick in consumer prices came as a continued advance in prices for shelter more than offset a steep drop in energy prices.

The report also showed the annual rate of consumer price growth slowed to 5.0 percent in March from 6.0 percent in February.

The year-over-year growth was slower than the 5.2 percent expected by economists and marks the smallest 12-month increase since May 2021.

Meanwhile, the report said core consumer prices, which exclude food and energy prices, rose by 0.4 percent in March after advancing by 0.5 percent in February. The increase matched economist estimates.

The core price growth reflected the increase in prices for shelter as well as higher prices for motor vehicle insurance, airline fares, household furnishings and operations, and new vehicles. Decreases in prices for medical care and used cars and trucks helped limit the upside.

The annual rate of growth by core consumer prices accelerated to 5.6 percent in March from 5.5 percent in February, which was also in line with expectations.

At 9:10 am ET, Richmond Federal Reserve President Thomas Barkin is scheduled to make opening remarks at Investing in Rural America 2023.

The Energy Information Administration is due to release its report on oil inventories in the week ended April 7th at 10:30 am ET.

Crude oil inventories are expected to dip by 0.6 million barrels after falling by 3.7 million barrels in the previous week.

At 12 pm ET, San Francisco Federal Reserve Bank President Mary Daly is scheduled to speak in coordination with the Salt Lake Chamber.

The Treasury Department is due to announce the results of this month’s auction of $32 billion worth of ten-year notes at 1 pm ET.

At 2 pm ET, the Federal Reserve is scheduled to release the minutes of its March 21-22 monetary policy meeting.

Stocks In Focus

Shares of Triton International (TRTN) are skyrocketing in pre-market trading after the intermodal container leasing company agreed to be acquired by Brookfield Infrastructure (BIPC) in a cash and stock transaction valuing the company’s common equity at approximately $4.7 billion.

Software company MondoDB (MDB) is also likely to see initial strength after Morgan Stanley upgraded its rating on the company’s stock to Overweight from Equal Weight.

Shares of Shopify (SHOP) may also move to the upside after JMP Securities upgraded its rating on the e-commerce company’s stock to Market Outperform from Market Perform.