Looming Inflation Data May Lead To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground after ending the previous session mostly higher.

Traders may look to cash in on yesterday’s gains ahead of the release of the Labor Department’s highly anticipated report on consumer price inflation on Wednesday.

Economists currently expect the annual rate of consumer price growth to accelerate to 3.6 percent in August from 3.2 percent in July, while the annual rate of core consumer price growth is expected to slow to 4.4 percent from 4.7 percent.

Ahead of the data, CME Group’s FedWatch Tool is currently indicating a 91.0 percent chance the Federal Reserve will leave interest rates unchanged next week.

The outlook for November is a little more uncertain, however, with the FedWatch Tool indicating a 54.8 percent chance rates will remain unchanged and a 41.6 percent chance of another quarter point rate hike.

A steep drop by shares of Oracle (ORCL) may weigh on the tech-heavy Nasdaq, with the software giant plunging by 9.5 percent in pre-market trading.

The slump by Oracle comes after the company reported weaker than expected fiscal first quarter revenues and provided disappointing revenue guidance for the current quarter.

Following the notable pullback seen last week, stocks moved mostly higher during trading on Monday. The major averages all moved to the upside on the day, adding to the modest gains posted last Friday.

The major averages all closed in positive territory, with the tech-heavy Nasdaq posting a standout gain. The Nasdaq jumped 156.37 points or 1.1 percent to 13,917.89, the S&P 500 climbed 29.97 points or 0.7 percent to 4,487.46 and the Dow rose 87.13 points or 0.3 percent to 34,663.72.

The tech-heavy Nasdaq received a boost from a surge by shares of Tesla (TSLA), with the electric car maker spiking by 10.1 percent after Morgan Stanley upgraded its rating on the company’s stock to Overweight from Equal-Weight.

Chipmaker Qualcomm (QCOM) also jumped by 3.9 percent after announcing an agreement with Apple (AAPL) to supply Snapdragon 5G Modem-RF Systems for smartphone launches in 2024, 2025 and 2026.

Additionally, shares of Hostess Brands (TWNK) soared by 19.1 percent after the Twinkie maker agreed to be acquired by J.M. Smucker (SJM) in a cash and stock transaction valued at approximately $5.6 billion.

The overall strength on Wall Street partly reflected easing concerns about the outlook for interest rates after a report from the Wall Street Journal suggested a shift in Federal Reserve officials’ stance on rates.

Fed insider Nick Timiraos said the central bank is likely to pause its recent series of rate hikes next week then take a “harder look at whether more are needed.”

While Timiraos said some Fed officials to still prefer to err on the side of raising rates too much, other see risks as more balanced and worry about unnecessarily causing a downturn or triggering financial turmoil.

Airline stocks turned in a strong performance on the day, resulting in a 1.7 percent advance by the NYSE Arca Airline Index. The index continued to regain ground after ending last Thursday’s trading at a four-month closing low.

Significant strength was also visible among gold stocks, as reflected by the 1.5 percent gain posted by the NYSE Arca Gold Bugs Index. The strength in the sector came amid a modest increase by the price of gold.

Retail, tobacco and software stocks also saw notable, while oil and natural gas stocks came under pressure over the course of the session.

Commodity, Currency Markets

Crude oil futures are jumping $1.06 to $88.35 a barrel after slipping $0.22 to $87.29 barrel on Monday. Meanwhile, after inching up $4.50 to $1,947.20 an ounce in the previous session, gold futures are falling $14 to $1,933.20 an ounce.

On the currency front, the U.S. dollar is trading at 146.97 yen compared to the 146.59 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0715 compared to yesterday’s $1.0750.

Asia

Asian stocks ended mixed on Tuesday as investors awaited Wednesday’s key U.S. inflation data that could influence the Federal Reserve’s interest rate trajectory.

The dollar reversed some of the previous session’s losses and gold was little changed, while oil edged up on supply worries stemming from fresh disruptions from powerful storms and floods in eastern Libya.

Chinese shares ended on a subdued note, with the Shanghai Composite Index slipping 0.2 percent to 3,137.06. Hong Kong’s Hang Seng Index dropped 0.4 percent to 18,025.89.

Real estate developer Country Garden Holdings soared before giving up most gains to end 1 percent higher after creditors voted to extend repayments on six onshore bonds late Monday.

Japanese stocks rallied as the yen’s retreat boosted auto shares. The Nikkei 225 Index jumped 1.0 percent to 32,776.37, while the broader Topix Index settled 0.8 percent higher at 2,379.91.

Honda Motor, Toyota and Nissan surged 2-3 percent, while technology start-up investor SoftBank added 2 percent and Uniqlo brand owner Fast Retailing rose 1.2 percent. Heavy machinery maker IHI plunged almost 16 percent to lead losses in the benchmark index.

Seoul stocks ended notably lower, dragged down by large-cap tech and energy stocks. The Kospi fell 0.8 percent to 2,536.58.

Steel giant POSCO Holdings slumped 4.2 percent and its chemical materials making unit POSCO Future M dropped 2.6 percent, while internet portal operator Naver jumped 3.8 percent.

Australian markets edged up slightly after a survey showed Australian business activity remained resilient in August despite higher borrowing costs.

The benchmark S&P ASX 200 Index rose 0.2 percent to 7,206.90, while the broader All Ordinaries Index closed up 0.2 percent at 7,402.90.

Miners and gold stocks pushed higher, while energy stocks lost ground, with Woodside Energy and Santos both falling around 1.5 percent.

Europe

European stocks are turning in a mixed performance on Tuesday as investors look ahead to the release of U.S. inflation data along with the ECB policy meeting this week for directional cues.

The German DAX is down by 0.3 and France’s CAC 40 is down by 0.1 percent, while the U.K.’s FTSE 100 is up 0.4 percent, driven by a weaker pound after the release of mixed labor market data pointing to a cooling labor market but strong wage growth in July.

The U.K. unemployment rate rose to 4.3 percent in the three months to July from 4.2 percent in the preceding period, the Office for National Statistics reported.

Regarding the wage growth, data showed that average earnings excluding bonuses grew the most since records began in 2001.

BOE policymaker Catherine Mann warned late Monday that it’s too soon for the Bank of England to stop raising rates.

Elsewhere, data from the federal statistics office showed earlier today that German wholesale prices continued their downward trend for a fifth consecutive month in August due to lower prices for mineral oil products.

Wholesale prices fell 2.7 percent compared to the same month last year.

German investor sentiment unexpectedly improved in September, with the ZEW economic sentient index rising to -11.4 points from -12.3 points in August.

In corporate news, Smurfit Kappa Group shares have moved sharply lower. The packaging firm announced a deal to combine with U.S. peer WestRock to form a new holding company, Smurfit WestRock.

German business software maker SAP has also declined after U.S. peer Oracle fell short on license and hardware revenue in the fiscal first quarter.

Meanwhile, Associated British Foods has jumped in London after the Primark owner raised its full-year profit outlook for the second time in four months, citing improved sales growth across categories.

Vallourec S.A. shares have also edged higher. The French manufacturing company focused on geothermal industry reaffirmed its EBITDA outlook for full year 2023.

U.S. Economic Reports

The Treasury Department is scheduled to announce the results of this month’s auction of $35 billion worth of ten-year notes at 1 pm ET.