Inflation Data May Contribute To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to move to the upside following the lackluster performance seen in the previous session.

Early buying interest may be generated in reaction to a Commerce Department report showing consumer price growth in the U.S. slowed in line with economist estimates in the month of October.

The report said the annual rate of consumer price growth decelerated to 3.0 percent in October from 3.4 percent in September. The slowdown matched expectations.

Core consumer price growth also slowed in line with estimates, slipping to 3.5 percent in October from 3.7 percent in September. Core consumer prices exclude food and energy prices.

The inflation readings, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending during the month.

The report said personal income edged up by 0.2 percent in October after climbing by 0.4 percent in September. The uptick came in line with economist estimates.

Personal spending also increased in line with estimates, rising by 0.2 percent in October following a 0.7 percent advance in September.

A separate report released by the Labor Department showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended November 25th.

The Labor Department said initial jobless claims inched up to 218,000, an increase of 7,000 from the previous week’s revised level of 211,000.

Economists had expected jobless claims to rise to 220,000 from the 209,000 originally reported for the previous week.

After ending Tuesday’s session modestly higher, stocks showed a lack of direction over the course of the trading day on Wednesday. Despite the choppy trading on the day, the Dow inched up to its best closing level in over three months.

The major averages eventually ended the day narrowly mixed. While the Dow crept up 13.44 points or less than a tenth of a percent to 35,430.42, the Nasdaq slipped 23.27 points or 0.2 percent to 14,258.49 and the S&P 500 edged down 4.31 points or 0.1 percent to 4,550.58.

Stocks saw early strength amid ongoing optimism about the outlook for interest rates despite conflicting remarks by Federal Reserve officials.

While Fed Governor Christopher Waller said Tuesday he is “increasingly confident that policy is currently well positioned,” Fed Governor Michelle W. Bowman said she expects further rate hikes will be needed.

Traders seem to be focusing more on the comments that reinforce expectations the Fed will leave policy unchanged until cutting rates beginning in mid-2024.

Positive sentiment also generated in reaction to a surge by shares of General Motors (GM), with the auto giant spiking by 9.4 percent after announcing $10 billion stock buyback and increasing its dividend.

Buying interest waned as the day progressed, however, with traders looking ahead to the release of key inflation readings on Thursday.

Computer hardware stocks saw substantial strength on the day, driving the NYSE Arca Computer Hardware Index up by 2.9 percent to a record closing high.

Data infrastructure company NetApp (NTAP) led the sector higher after reporting better than expected fiscal second quarter results and raising its fiscal third quarter and full-year guidance.

Significant strength was also visible among banking stocks, as reflected by the 2.0 percent surge by the KBW Bank Index. The index reached its best closing level in over three months.

Telecom, brokerage and semiconductor stocks also saw notable strength, while tobacco stocks and energy stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are climbing $0.85 to $78.71 a barrel after jumping $1.45 to $77.86 a barrel on Wednesday. Meanwhile, after rising $7.10 to $2,047.10 an ounce in the previous session, gold futures are slipping $7.20 to $2,039.90 an ounce.

On the currency front, the U.S. dollar is trading at 147.59 yen versus the 147.24 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0929 compared to yesterday’s $1.0969.

Asia

Positive sentiment prevailed in most Asian markets on Thursday amidst dovish comments by Federal Reserve officials that markets see as heralding an earlier-than-expected rate cut. Easing inflation in Europe as well as hopes of Chinese stimulus also buoyed market sentiment.

China’s Shanghai Composite Index gained 0.3 percent to finish trading at 3,029.67. The day’s trading ranged between 3,030.91 and 3,013.77. The Shenzhen Component Index dipped 0.2 percent to close at 9,726.92.

The Japanese benchmark Nikkei 225 Index climbed or 0.5 percent to end trading at 33,260.14. The day’s trading range was between 33,486.89 and 33,161.07.

Advantest Corp. was the top gainer with a surge of 4.3 percent. NEC Corp., Kawasaki Kisen Kaisha, Tokyo Gas, and Sumco Corp. all rallied more than 3 percent.

Shiseido plunged more than 5 percent. Nippon Kayaku slipped 3.7 percent. Rakuten, Toku Fudosan, Taisei Corp. all declined more than 2 percent.

The Hang Seng Index of the Hong Kong Stock Exchange added 0.3 percent from the previous close to finish trading at 17,042.88. The day’s trading range was between a high of 17,068.26 and a low of 16,863.05.

The Korean Stock Exchange’s Kospi Index advanced 0.6 percent to close trading at 2,535.29. The day’s trading range was between 2,507.80 and 2,535.29.

Australia’s S&P/ASX200 Index closed trading at 7,087.30, adding 0.7 percent. The day’s trading range was between 7022.6 and 7,087.30.

Iress jumped 14.9 percent following publication of upgraded earnings guidance. EML Payments also surged more than 11 percent. Zip gained 6.6 percent followed by St Barbara that added 5 percent and Codan that added 4.7 percent.

Omni Bridgeway slumped 5.5 percent followed by Appen that declined more than 3 percent. AGL Energy, Goodman Group, Mesoblast all slipped more than 2 percent.

The NZX 50 Index of the New Zealand Stock Exchange gained 0.8 percent to close trading at 11,330.20 versus the previous close of 11,235.94. Trading ranged between 11,192.86 and 11,330.63.

Oceania Healthcare surged 5.7 percent. Restaurant Brand New Zealand rallied 4 percent. Air New Zealand, Fletcher Building, Ryman Healthcare all gained more than 3 percent.

EROAD slipped 4.7 percent after a rising streak. Summerset Group Holdings as well as A2 Milk Company slipped more than 2 percent. Arvida Group and Sky Network Television, both declined more than 1 percent.

Wall Street closed on a mixed note on Wednesday amidst dovish comments from Fed officials that boosted rate cut hopes and GDP readings that surpassed the previous estimate. Anxiety ahead of the release of the PCE readings weighed on sentiment.

The Nasdaq Composite slipped 0.2 percent to close at 14,258.49 whereas the Dow Jones Industrial Average edged slightly higher to finish trading at 35,430.42.

Europe

After a slightly positive start and a subsequent fall to lower levels, European stocks are moving higher on Thursday, with investors cheering data showing a bigger than expected drop in the Eurozone inflation rate for the month of November.

Optimism the Fed will start reducing interest rates sooner than earlier forecast continues to aid sentiment.

While the U.K.’s FTSE 100 Index has advanced by 0.9 percent, the French CAC 40 Index is up by 0.7 percent and the German DAX Index is up by 0.6 percent.

In the UK market, BP, Ds Smith and Smurfit Kappa Group are gaining 2.3 to 2.5 percent. Royal Dutch Shell, Carnival, Rolls-Royce Holdings, Whitbread, EasyJet, Standard Chartered, Imperial Brands, GSK and JD Sports Fashion are up 1 to 2 percent.

Severn Trent is down by about 3 percent Johnson Matthey is declining 2.7 percent, while Pennon and United Utilities are down 1.3 percent and 1 percent, respectively.

In the German market, Deutsche Bank is gaining 2 percent. Henkel and Fresenius are up 1.6 percent and 1.5 percent, respectively. Bayer, Puma, SAP, RWE, Brenntag and Zalando are also notably higher.

Continental, Sartorius, MTU Aero Engines, Volkswagen, BASF and Merck are down 0.5 to 1.2 percent.

In Paris, Unibail Rodamco, TotalEnergies and STMicroElectronics are climbing 1.6 to 1.7 percent. Credit Agricole, Societe Generale and BNP Paribas are gaining 1 to 1.4 percent.

Alstom is declining 2.6%. Hermes International, Teleperformance and Thales are lower by 1 to 1.25 percent.

On the economic front, data from Eurostat showed the inflation rate in the Euro Area slowed to 2.4 percent year-on-year in November, the lowest level since July 2021, according to preliminary estimate. On a monthly basis, consumer prices fell by 0.5 percent in November, the largest monthly drop since January 2020.

Data from Destatis showed retail sales in German rose 1.1 percent month-over-month in October, rebounding from a 0.8 percent drop in September. The jump was higher than the forecast of a 0.4 percent increase. Year-on-year, retail sales decreased 0.1 percent in October.

Meanwhile, the unemployment rate in Germany rose to 5.9 percent in November, up from October’s 5.8 percent.

Data from statistical office INSEE showed France’s consumer price inflation slowed to the lowest rate since January 2022, coming in at 3.4 percent year-on-year in November, down from 4 percent in the previous month, according to preliminary estimates. On a monthly basis, consumer prices dropped by 0.2 percent in November.

A separate data from INSEE showed the French economy fell 0.1 percent on quarter in the third-quarter, following a 0.6 percent expansion in the previous period. On a yearly basis, the economy rose 0.6 percent, the weakest expansion in over two years.

Household spending in France declined by 0.9 percent from a month earlier in October 2023.

Meanwhile, producer prices in the French domestic market was stable from a month earlier in October, following a 0.7 percent increase in the previous month. Year-on-year, producer prices fell 1.2 percent in October down from a downwardly revised 1.5 percent drop in the previous month.

U.S. Economic Reports

Consumer price growth in the U.S. slowed in line with economist estimates in the month of October, according to closely watched inflation readings released by the Commerce Department on Thursday.

The report said the annual rate of consumer price growth decelerated to 3.0 percent in October from 3.4 percent in September. The slowdown matched expectations.

Core consumer price growth also slowed in line with estimates, slipping to 3.5 percent in October from 3.7 percent in September. Core consumer prices exclude food and energy prices.

The inflation readings, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending during the month.

The report said personal income edged up by 0.2 percent in October after climbing by 0.4 percent in September. The uptick came in line with economist estimates.

Personal spending also increased in line with estimates, rising by 0.2 percent in October following a 0.7 percent advance in September.

A separate report released by the Labor Department on Thursday showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended November 25th.

The Labor Department said initial jobless claims inched up to 218,000, an increase of 7,000 from the previous week’s revised level of 211,000.

Economists had expected jobless claims to rise to 220,000 from the 209,000 originally reported for the previous week.

Meanwhile, the report said the less volatile four-week moving average edged down to 220,000, a decrease of 500 from the previous week’s revised average of 220,500.

At 9:15 am ET, New York Federal Reserve President John Williams is scheduled to speak before the Bretton Woods Committee’s “Exploring Innovations in Central Banking” conference.

MNI Indicators is due to release its report on Chicago area business activity in the month of November at 9:45 am ET. The Chicago business barometer is expected to inch up to 45.1 in November from 44.0 in October, although a reading below 50 would still indicate a contraction.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of October. Pending home sales are expected to slump by 2.0 percent in October after jumping by 1.1 percent in September.

Stocks In Focus

Shares of Salesforce (CRM) are moving sharply higher in pre-market trading after the cloud software company reported better than expected fiscal third quarter earnings and provided upbeat guidance.

Snowflake (SNOW) is also likely to see initial strength after reporting fiscal third quarter results that exceeded analyst estimates and forecasting better than expected fiscal fourth quarter revenues.

On the other hand, shares of Pure Storage (PSTG) may come under pressure after the data storage company provided disappointing revenue guidance for the current quarter and full year.