Inflation Data Largely In Line With Estimates May Lead To Choppy Trading

The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction following the pullback seen in the previous session.

The futures initially moved to the downside following the release of the Labor Department’s highly anticipated report on consumer price inflation but have bounced back near the unchanged line since then.

The report said the consumer price index climbed by 0.6 percent in August after inching up by 0.2 percent in July. The price growth matched expectations.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in August after edging up by 0.2 percent in July. Economists had expected another 0.2 percent uptick.

The Labor Department also said the annual rate of consumer price growth accelerated to 3.7 percent in August from 3.2 percent in July. The annual rate of growth was expected to accelerate to 3.6 percent.

Meanwhile, the report said the annual rate of growth by core consumer prices slowed to 4.3 percent in August from 4.7 percent in July, in line with economist estimates.

With the data largely coming in line with economist estimates, the report may lead to persistent uncertainty about the outlook for interest rates.

Following the report, CME Group’s FedWatch Tool is indicating a 95.0 percent chance the Federal Reserve will leave interest rates unchanged next week.

The outlook for November remains more mixed, however, with the FedWatch Tool indicating a 55.8 percent chance rates will remain unchanged and a 42.1 percent chance of another quarter point rate hike.

Stocks attempted to recover from initial weakness on Tuesday but moved back to the downside in the latter part of the session. The major averages all ended the day in negative territory, although the Dow posted a relatively modest loss.

The tech-heavy Nasdaq slumped 144.28 points or 1.0 percent to 13,773.61, largely offsetting the strong gain posted on Monday. The S&P 500 also fell 25.56 points or 0.6 percent to 4,461.90, while the Dow edged down 17.73 points or 0.1 percent to 34,645.99.

The lower close on Wall Street came as traders look ahead to the release of the Labor Department’s highly anticipated report on consumer price inflation on Wednesday.

Some selling pressure was also generated in reaction to a sharp increase by the price of crude oil, with crude for October delivery surging $1.55 to $88.84 a barrel.

The price of crude oil has reached its highest levels since last November amid worries about tight supplies, raising concerns about sticky inflation.

A steep drop by shares of Oracle (ORCL) weighed on the tech-heavy Nasdaq, with the software giant plunging by 13.5 percent.

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

Software stocks saw substantial weakness amid the steep drop by Oracle, with the Dow Jones U.S. Software Index plunging by 2.4 percent after ending Monday’s trading at its best closing level in over a month.

Considerable weakness was also visible among housing stocks, as reflected by the 1.9 percent slump by the Philadelphia Housing Sector Index.

Computer hardware and networking stocks also saw notable weakness, while energy stocks moved sharply higher along with the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index surged by 2.4 percent and 2.1 percent, respectively.

Banking stocks also showed a significant move to the upside over the course of the session, resulting in a 1.7 percent gain by the KBW Bank Index.

Commodity, Currency Markets

Crude oil futures are rising $0.34 to $89.18 a barrel after surging $1.55 to $88.84 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,933.30, down $1.80 compared to the previous session’s close of $1,935.10. On Tuesday, gold fell $12.10.

On the currency front, the U.S. dollar is trading at 147.61 yen compared to the 147.08 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0732 compared to yesterday’s $1.0754.

Asia

Asian stocks ended mostly lower on Wednesday as investors braced for key U.S. inflation data due later in the day that could influence the outlook for interest rates.

The CPI reading is expected to show that inflation accelerated in August from the prior month on the back of higher fuel prices and strong consumer spending.

The dollar steadied in Asian trading and gold edged lower, while oil prices held near ten-month highs, drawing support from upbeat outlooks published by OPEC and the EIA.

Chinese stocks closed lower even as property stocks logged strong gains after embattled developer Country Garden won approval from its creditors to extend the maturity of one more onshore bond.

The benchmark Shanghai Composite Index dropped 0.5 percent to 3,123.07, while Hong Kong’s Hang Seng Index slipped marginally to 18,009.22.

Japanese stocks ended a range-bound session modestly lower after August producer prices data came in only slightly below economists’ estimates.

Investors also looked ahead to next week’s Bank of Japan policy meeting after Governor Kazuo Ueda signaled an early end to negative interest rates.

The Nikkei 225 Index slipped 0.2 percent to 32,706.52, while the broader Topix Index finished marginally lower at 2,378.64.

SoftBank Group, Recruit Holdings and IHI lost 2-3 percent. Among the top gainers, lender Mitsubishi UFJ Financial Group rallied 3.1 percent.

Seoul stocks ended nearly unchanged, with the Kospi finishing marginally lower at 2,534.70 after tech stocks plunged on Wall Street overnight led by Apple and Oracle.

Automakers advanced after Hyundai Motor and its labor union reached a tentative wage agreement without a strike. Hyundai Motor jumped 1.9 percent and its smaller affiliate Kia added 1 percent.

Australian markets ended lower as investors awaited August unemployment data, due on Thursday, for further cues on rate action by the Reserve Bank of Australia.

The benchmark S&P ASX 200 Index fell 0.7 percent to 7,153.90 and the broader All Ordinaries Index settled 0.8 percent lower at 7,345.70.

While miners led losses, energy stocks posted modest gains as oil prices hit 10-month highs on supply tightness.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index rose 0.5 percent to 11,357.12.

Europe

European stocks have fallen in cautious trading on Wednesday, as rising oil prices and weak regional data fueled worries about inflation and slowing global growth.

Data showed earlier today that Eurozone industrial production fell more than expected in July. Industrial output fell 1.1 percent month-on-month, Eurostat said in its latest release, versus the 0.7 percent drop expected and a 0.4 percent increase reported in June.

Elsewhere, data out of the U.K. showed the British economy shrank at the fastest pace in seven months. Real gross domestic product fell 0.5 percent in July, offsetting June’s 0.5 percent increase, the Office for National Statistics reported. The latest figure was worse than economists’ forecast of 0.2 percent decline.

While the U.K.’s FTSE 100 Index is down by 0.3 percent, the French CAC 40 Index and the German DAX Index are down by 0.7 percent and 0.8 percent, respectively.

Zara owner Inditex, the world’s biggest fashion retailer, has tumbled despite reporting a 40 percent jump in half-year net profit.

BP Plc has also fallen after CEO Bernard Looney resigned effective immediately over personal relationships with colleagues.

Meanwhile, Aviva has rallied = after the British insurer said it is exiting its Singlife joint venture, selling its 25.9 percent stake in Singapore Life Holdings and two debt instruments to Sumitomo Life for a combined 800 million pounds ($996.96 million).

Hunting has also jumped. The engineering company confirmed its outlook for fiscal 2023 and 2024, and set targets till the year 2030, expecting growth.

French lender Societe Generale has also risen after it named Bruno Delas as chief information officer to replace Carlos Goncalves, who is leaving the bank.

Automaker Renault has also surged after the European Commission, the executive arm of the European Union, launched an investigation into subsidies given to electric vehicle makers in China.

European Commission President Ursula von der Leyen said Europe was “open to competition but not for a race to the bottom.”

U.S. Economic Reports

The Labor Department released a highly anticipated report on Wednesday showing U.S. consumer prices increased in line with economist estimates in the month of August.

The report said the consumer price index climbed by 0.6 percent in August after inching up by 0.2 percent in July. The price growth matched expectations.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in August after edging up by 0.2 percent in July. Economists had expected another 0.2 percent uptick.

The Labor Department also said the annual rate of consumer price growth accelerated to 3.7 percent in August from 3.2 percent in July. The annual rate of growth was expected to accelerate to 3.6 percent.

Meanwhile, the report said the annual rate of growth by core consumer prices slowed to 4.3 percent in August from 4.7 percent in July, in line with economist estimates.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended September 8th.

Crude oil inventories are expected to decrease by 2.0 million barrels after tumbling by 6.3 million barrels in the previous week.

The Treasury Department is scheduled to announce the results of this month’s auction of $20 billion worth of thirty-year bonds at 1 pm ET.