Looming Inflation Data May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to move to the downside after ending yesterday’s choppy trading session mixed.

Traders may look to cash in on some of the recent strength in the markets ahead of the release of closely watched readings on consumer price inflation on Thursday.

The inflation readings, which are said to be preferred by the Federal Reserve, are expected to show the annual rate of consumer price growth slowed to 2.4 percent in January from 2.6 percent in December.

The annual rate of growth by core consumer prices, which exclude food and energy prices, is also expected to dip to 2.8 percent in January from 2.9 percent in December.

With Fed officials saying they need greater confidence inflation is slowing before they consider cutting interest rates, the data could have a significant impact on the outlook for rates.

Revised data released by the Commerce Department this morning showed the U.S. economy grew by slightly less than previously estimated in the fourth quarter of 2023.

The Commerce Department said the jump by real gross domestic product in the fourth quarter was downwardly revised to 3.2 percent from the previously reported 3.3 percent. Economists had expected the surge in GDP to be unrevised.

Meanwhile, the report said the increase in consumer prices in the fourth quarter was upwardly revised to 1.8 percent from 1.7 percent, while the increase in core prices was upwardly revised to 2.1 percent from 2.0 percent.

Following the modest pullback seen during Monday’s session, stocks showed a lack of direction over the course of the trading day on Tuesday. The major averages bounced back and forth across the unchanged line before eventually ending the day mixed.

While the Nasdaq climbed 59.05 points or 0.4 percent to 16,035.30 and the S&P 500 edged up 8.65 points or 0.2 percent to 5,078.18, the Dow dipped 96.82 points or 0.3 percent to 38,972.41.

Uncertainty about the near-term outlook for the markets contributed to the choppy trading on Wall Street following last week’s advance by the Dow and S&P 500 to new record highs.

Traders also stuck to the sidelines ahead of the release of some key economic data later this week, including closely watched inflation readings.

A report released by the Commerce Department before the start of trading showed a substantial decrease by new orders for U.S. manufactured durable goods saw a substantial decrease in the month of January.

The Commerce Department said durable goods orders plunged by 6.1 percent in January after falling by a revised 0.3 percent in December.

Economists had expected durable goods orders to tumble by 4.5 percent compared to the unchanged reading that had been reported for the previous month.

Excluding a steep drop in orders for transportation equipment, durable goods orders dipped by 0.3 percent in January after edging down by 0.1 percent in December. Ex-transportation orders were expected to rise by 0.2 percent.

Meanwhile, the Conference Board released a report showing an unexpected deterioration in U.S. consumer confidence in the month of February.

The Conference Board said its consumer confidence index slid to 106.7 in February from a downwardly revised 110.9 in January.

The decrease surprised economists, who had expected the consumer confidence index to inch up to 115.0 from the 114.8 originally reported for the previous month.

Reflecting the lackluster performance by the broader markets, most of the major sectors showed only modest moves on the day.

Airline stocks showed a significant move to the upside, however, with the NYSE Arca Airline Index climbing by 1.3 percent.

Notable strength was also visible among utilities stocks, as reflected by the 1.2 percent gain posted by the Dow Jones Utility Average.

Banking, steel and biotechnology stocks also saw some strength on the day, while gold stocks moved to the downside despite a modest increase by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are edging down $0.09 to $78.78 a barrel after jumping $1.29 to $78.87 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,041.90, down $2.20 compared to the previous session’s close of $2,044.10. On Tuesday, gold rose $5.20.

On the currency front, the U.S. dollar is trading at 150.61 yen compared to the 150.51 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0815 compared to yesterday’s $1.0844.

Asia

Asian stocks ended on a mixed note Wednesday as worries over rate cuts persisted, and investors awaited the release of U.S. and Eurozone inflation readings as well as Chinese PMI data this week for near-term direction.

Soft U.S. durable goods orders and consumer confidence data weighed on the dollar index, while oil and gold prices dipped slightly in Asian trading.

With several Federal Reserve officials warning against cutting U.S. interest rates too soon, the spotlight is on the key PCE price index data due Thursday.

Chinese markets tumbled due to increased concerns surrounding the country’s beleaguered property market.

The benchmark Shanghai Composite Index plunged 1.9 percent to 2,957.85 as Country Garden Holdings grappled with a liquidation petition in a Hong Kong court over its failure to repay a HK$1.6 billion ($200 million) loan.

Shares of the embattled developer plummeted 12.5 percent in Hong Kong, while the Hang Seng Index slumped 1.5 percent to close at 16,536.85.

Japanese shares ended little changed as investors locked in profits after recent strong gains. The Nikkei 225 Index finished marginally lower at 39,208.03 on speculation about BOJ policy shift. The broader Topix Index slipped 0.1 percent to 2,674.95.

Seoul stocks rebounded after two straight sessions of losses. The Kospi gained 1.0 percent to end at 2,652.29 as the market watchdog chief warned that companies could face penalties for failing to boost shareholder returns in the long run.

Australian markets finished marginally lower after data showed inflation remained at a two-year low in January. Financials declined, offsetting gains in the mining sector after iron ore prices rebounded overnight.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index rose 0.6 percent to 11,763.32 as the Reserve Bank of New Zealand held the cash rate steady at 5.5 percent and trimmed the forecast peak for rates.

Europe

European stocks are mixed on Wednesday as investors await the release of key U.S. and Eurozone inflation readings along with Chinese PMI data this week for directional cues.

On a light day on the economic front, data from the European Commission showed Euro area economic confidence unexpectedly weakened to a three-month low in February, suggesting that the currency bloc remains close to recession.

The economic sentiment index fell to 95.4 from revised 96.1 in the previous month. The index was forecast to rise to 96.7.

While the German DAX Index is up by 0.2 percent, the French CAC 40 Index is just below the unchanged line and the U.K.’s FTSE 100 Index is down by 0.7 percent.

ASM International has moved notably lower. The semiconductor equipment maker projected revenue this quarter that fell far below market expectations.

Just Eat Takeaway.com has also slumped even though the food delivery company reported a narrower net loss for last year.

British consumer goods group Reckitt Benckiser has also moved sharply lower after fourth quarter like-for-like net sales came in below expectations.

Luxury car maker Aston Martin has also fallen after it pushed back plans to launch its first battery electric vehicle by a year.

Halfords Group has plummeted after the motoring and cycling company trimmed its fiscal 2024 profit forecast.

French media conglomerate Lagardere has also tumbled after saying it had received an offer from luxury goods group LVMH to buy Paris Match magazine.

Worldline has also plummeted as the payment firm reported a full-year loss on a 1.15-billion-euro “goodwill impairment” linked to its merchant services activities.

Nicox has also slumped. The ophthalmology company said it has appointed the highly experienced biotech executive Gavin Spencer as its Chief Executive Officer.

Lanxess AG has also fallen. The specialty chemicals company said it has identified an impairment requirement on goodwill amounting to 413 million euros, mainly affecting the Business Units Flavors & Fragrances and Polymer Additives.

Meanwhile, Vodafone has rallied. The telecom giant said it is in advanced talks with Swisscom about a cash sale of its Italian arm.

Glanbia, a dietary supplement company, has also soared after reporting a 20 percent increase in full year after tax profits.

Business process outsourcing firm Capita has advanced after the company said it has extended and expanded its customer service contract with an undisclosed European telecoms provider.

U.S. Economic Reports

Revised data released by the Commerce Department on Wednesday showed the U.S. economy grew by slightly less than previously estimated in the fourth quarter of 2023.

The Commerce Department said the jump by real gross domestic product in the fourth quarter was downwardly revised to 3.2 percent from the previously reported 3.3 percent. Economists had expected the surge in GDP to be unrevised.

The slightly slower than previously estimated growth reflected downward revisions to private inventory investment and federal government spending as well as an upward revision to imports, which are a subtraction in the calculation of GDP.

Meanwhile, the report also showed upward revisions to state and local government spending, consumer spending, residential fixed investment, nonresidential fixed investment and exports.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended February 23rd.

Crude oil inventories are expected to rise by 1.8 million barrels after increasing by 3.5 million barrels in the previous week.

Atlanta Federal Reserve President Raphael Bostic is due to speak on monetary policy and the economy before the Greater North Fulton Chamber of Commerce at 12 pm ET.

At 12:15 pm ET, Boston Federal Reserve President Susan Collins is scheduled to speak and participate in a fireside chat before an event hosted by the Center for Business, Government and Society at the Dartmouth College Tuck School of Business.

New York Federal Reserve President John Williams is due to participate in a hybrid economic briefing organized by the Long Island Association at 12:45 pm ET.