Futures Move Higher Following Unexpected Drop In Producer Prices

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to move back to the upside after ending yesterday’s extremely volatile session mostly lower.

The futures got a boost following the release of a report from the Labor Department showing an unexpected decrease in U.S. producer prices in the month of March.

The Labor Department said its producer price index for final demand fell by 0.5 percent in March following a revised unchanged reading in February.

Economists had expected producer prices to come in unchanged compared to the 0.1 percent dip originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed dramatically to 2.7 percent in March from 4.9 percent in February. Economists had expected the pace of growth to slow to 3.0 percent.

Combined with yesterday’s tamer-than-expected consumer price inflation data, the report may help ease concerns about inflation and the outlook for interest rates.

A separate Labor Department report showed first-time claims for U.S. unemployment benefits rose by more than expected in the week ended April 8th.

The report said initial jobless claims climbed to 239,000, an increase of 11,000 from the previous week’s unrevised level of 228,000. Economists had expected jobless claims to rise to 232,000.

Nonetheless, overall trading activity may be somewhat subdued, as trades look ahead to tomorrow’s reports on retail sales and industrial production amid concerns about a potential recession.

With traders reacting to highly anticipated consumer price inflation data as well as the minutes of the latest Federal Reserve meeting, stocks saw substantial volatility over the course of the trading session on Wednesday.

The major showed wild swings back and forth across the unchanged line before eventually closing in negative territory. The Dow edged down 38.29 points or 0.1 percent to 33,646.50, the S&P 500 fell 16.99 points or 0.4 percent to 4,091.95 and the Nasdaq slid 102.54 points or 0.9 percent to 11,929.34.

Stocks initially benefited from a positive reaction to a Labor Department report showing U.S. consumer prices increased by less than expected 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 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.

Stocks turned lower over the course of the morning, however, as many economists said they still expect the Federal Reserve to raise interest rates by another quarter point early next month.

While buying interest reemerged later in the session, stocks moved back to the downside after the minutes of the latest Fed meeting suggested the recent banking sector turmoil could lead to a recession.

The minutes of the March 21-22 meeting revealed that the staff’s economic projection in light of the banking sector turmoil included a mild recession starting later this year, with a recovery over the subsequent two years.

While many of the major sectors showed only modest moves on the day, airline stocks pulled back sharply after Tuesday’s rally, dragging the NYSE Arca Airline Index down by 2.4 percent.

Significant weakness also emerged among semiconductor stocks, as reflected by the 1.8 percent slump by the Philadelphia Semiconductor Index.

Retail stocks also came under pressure over the course of the session, with the Dow Jones U.S. Retail Index falling by 1.6 percent.

Banking and telecom stocks also moved to the downside on the day, while some strength remained visible among pharmaceutical, gold and oil service sectors.

Commodity, Currency Markets

Crude oil futures are slipping $0.30 to $82.96 a barrel after surging $1.73 to $83.26 a barrel on Wednesday. Meanwhile, after rising $5.90 to $2024.90 an ounce in the previous session, gold futures are jumping $19.80 to $2,044.70 an ounce.

On the currency front, the U.S. dollar is trading at 132.83 yen versus the 113.13 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1032 compared to yesterday’s $1.0992.

Asia

Asian stocks recovered from early losses to end mixed on Thursday after minutes from the Fed’s March 21-22 meeting indicated that officials see the U.S. economy entering a “mild recession” by year’s end in the wake of the banking crisis.

The dollar held near a two-month low and Treasury yields were mixed as investors digested cooler-than-expected inflation data out of the U.S.

Gold ticked higher on dollar weakness, while oil prices were little changed after rallying sharply for two straight sessions.

Chinese shares ended modestly lower, with the Shanghai Composite Index slipping 0.3 percent to 3,318.36. Hong Kong’s Hang Seng Index eased 0.2 percent to settle at 20,344.48.

Shares of embattled Chinese developer Sunac China Holdings sank 53.5 percent in Hong Kong as the stock resumed trade following a suspension of more than a year.

Japanese shares rose modestly to extend gains for a fifth day running on optimism of a recovery in the domestic retail sector.

The Nikkei 225 Index recovered from an early slide to close 0.3 percent higher at 28,156.97, while the broader Topix finished marginally higher at 2,007.93.

Aeon rallied 2.7 percent after the retailer posted record revenue in the year through February. Uniqlo operator Fast Retailing rose 2.1 percent ahead of its earnings release due Thursday. Financials lost ground on U.S. recession worries.

Seoul stocks ended higher for a fifth straight session after choppy trading. The Kospi climbed 0.4 percent to 2,561.66, led by large-cap tech and bio companies. Metal stocks fell on global growth worries, with POSCO Holdings tumbling 3.7 percent and Korea Zinc losing 1.7 percent.

Australian markets declined to snap a two-day wining steak after data showed the country’s job market grew far more than expected in March, suggesting further monetary policy tightening by Reserve Bank at next months’ meeting.

The benchmark S&P/ASX 200 Index dropped 0.3 percent to 7,324.10, dragged down by mining and banking stocks. The broader All Ordinaries Index eased 0.2 percent to end at 7,520.70.

Europe

European stocks have advanced on Thursday despite worries about a U.S. recession and considerable uncertainty about the Federal Reserve’s tightening campaign.

Investors also reacted to mixed regional data and looked ahead to the release of financial results from U.S. companies due later in the week for direction.

German consumer price inflation climbed 7.4 percent year-over-year in March, the lowest level in seven months and slower than the 8.7 percent rise in February, final data from Destatis revealed. The latest inflation rate was in line with flash data published on March 30.

Data out of the U.K. showed Britain’s economy stagnated in February as a result of strikes by public workers.

Eurozone industrial output rose by 1.5 percent sequentially in February versus 0.7 percent previous, Eurostat said in its latest report.

While the French CAC 40 Index has jumped by 1.0 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both up by 0.1 percent.

Grocer Tesco has shown a significant move to the upside on the day after reporting a jump in annual sales.

High technology products group Oxford Instruments has also soared after saying it was trading ahead of expectations for the full year.

Luxury giant LVMH has also surged in Paris after its first-quarter revenue grew by 17 percent, more than double analysts’ expectations, as China emerged from COVID lockdowns.

Kering SA and Hermes have also climbed after customs data showed Chinese exports rose for the first time in 6 months.

Total exports soared 14.8 percent year-on-year in March, the data showed, a sharp rise from last March when strict virus lockdowns crippled normal economic activity.

Meanwhile, British bank Lloyds and packaging firm Smurfit Kappa Group have moved sharply lower on going ex-dividend.

Imperial Brands has also fallen. The cigarette maker expects a drop in first-half revenue due to its exit from Russia.

U.S. Economic Reports

Reflecting a steep drop in energy prices, the Labor Department released a report on Thursday showing an unexpected decrease in U.S. producer prices in the month of March.

The Labor Department said its producer price index for final demand fell by 0.5 percent in March following a revised unchanged reading in February.

Economists had expected producer prices to come in unchanged compared to the 0.1 percent dip originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed dramatically to 2.7 percent in March from 4.9 percent in February. Economists had expected the pace of growth to slow to 3.0 percent.

A separate Labor Department report showed first-time claims for U.S. unemployment benefits rose by more than expected in the week ended April 8th.

The report said initial jobless claims climbed to 239,000, an increase of 11,000 from the previous week’s unrevised level of 228,000. Economists had expected jobless claims to rise to 232,000.

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

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