Futures Turn Positive Following Highly Anticipated Inflation Data

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 the previous session modestly lower.

The futures turned positive following the release of a highly anticipated Commerce Department showing consumer prices in the U.S. increased in line with economist estimates in the month of January.

The Commerce Department said consumer prices rose by 0.3 percent in January after inching up by a revised 0.1 percent in December.

Economists had expected consumer prices to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.

Excluding food and energy prices, core consumer prices climbed by 0.4 percent in January after edging up by a revised 0.1 percent in December. The increase in core prices also matched estimates.

Meanwhile, the report said the annual rate of consumer price growth slowed to 2.4 percent in January from 2.6 percent in December. The slowdown matched expectations.

The annual rate of core consumer price growth also slowed to 2.8 percent in January from 2.9 percent in December, in line with estimates.

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

The slowdown in consumer price growth may generate optimism about the outlook for interest rates, as Fed officials have said they need greater confidence is slowing before they consider cutting rates.

A separate report released by the Labor Department showing first-time claims for U.S. unemployment benefits rose by more than expected in the week ended February 24th may also lead to interest rate optimism.

Stocks regained ground after an early move to the downside on Wednesday but still ended the day mostly lower. The major averages all finished the day in negative territory following the mixed performance on Tuesday, with the Dow closing lower for the third consecutive session.

After falling by more than 200 points in early trading, the Dow ended the day down just 23.39 points or 0.1 percent at 38,949.02. The S&P 500 dipped 8.42 points or 0.2 percent to 5,069.76, while the Nasdaq slid 87.56 points or 0.6 percent at 15,947.74.

The early weakness on Wall Street came as some traders looked to cash in on the recent strength in the markets ahead of the release of closely watched readings on consumer price inflation on Thursday.

Selling pressure waned shortly after the start of trading, however, with the subsequent recovery attempt potentially reflecting a positive reaction to revised data showing 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.

“It is only in the topsy-turvy world of Wall Street where bad news can be good news (e.g. lower economic growth is good) because of the interplay between the economy, markets and the Federal Reserve,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

He added, “In a market environment where people are worried about a Fed keeping rates higher for longer, any drop in economic activity (or inflation) can be seen as another reason why the Fed can cut rates sooner.”

Gold stocks turned in some of the market’s worst performances on the day, dragging the NYSE Arca Gold Bugs Index down by 1.5 percent. The weakness among gold stocks came amid a modest decrease by the price of the precious metal.

Notable weakness was also visible among semiconductor stocks, as reflected by the 1.1 percent loss posted by the Philadelphia Semiconductor Index.

Steel, airline and networking stocks also moved to the downside on the day, while considerable strength emerged among commercial real estate stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.31 to $78.85 a barrel after falling $0.33 to $78.54 a barrel on Wednesday. Meanwhile, after edging down $1.40 to $2,042.70 an ounce in the previous session, gold futures are inching up $5 to $2,047.70 an ounce.

On the currency front, the U.S. dollar is trading at 149.78 yen versus the 150.69 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0834 compared to yesterday’s $1.0838.

Asia

Asian stocks ended mixed on Thursday, while the dollar was stable as investors awaited the Federal Reserve’s preferred inflation gauge later in the day that will help identify the path forward for U.S. interest rates.

Gold edged up slightly, while oil extended overnight losses after data showed a larger than expected increase in U.S. crude inventories in the week ended February 23rd.

Chinese markets rallied after the country’s securities regulator said it would tighten scrutiny of derivative businesses in the stock market.

Investors also pinned hopes that more aggressive stimulus steps will emerge from next week’s annual session of the National People’s Congress.

The benchmark Shanghai Composite Index jumped 1.9 percent to 3,015.17, while Hong Kong’s Hang Seng Index settled 0.2 percent lower at 16,511.44.

Japanese shares edged down slightly, and the yen rose against the dollar after a Bank of Japan (BOJ) official called for an overhaul of the central bank’s ultra-loose monetary policy, including an exit from negative interest rates and bond yield control.

The Nikkei 225 Index slipped 0.1 percent to 39,166.19, while the broader Topix Index finished marginally higher at 2,675.73.

Chip-making equipment maker Tokyo Electron reversed early losses to end 1 percent higher. Tech investor SoftBank lost 1.5 percent, while Fast Retailing, owner of clothing brand Uniqlo, ended on a flat note.

Aozora Bank soared 9.5 percent after activist fund City Index Eleventh said it had built a 5.4 percent stake in the Tokyo-based bank.

Convenience store chain Seven & i Holdings rallied 6.2 percent after reports it may sell a supermarket unit to investment funds.

Japanese industrial output fell at the fastest pace in nearly 4 years in January, while retail sales grew more than expected in the month, separate data showed earlier in the day.

Seoul stocks fell modestly ahead of the March 1 Independence Movement Day holiday. The Kospi dropped 0.4 percent to 2,642.36.

Samsung Biologics, Celltrion, Naver and Kakao lost 3-5 percent. Carmakers bucked the weak trend, with Hyundai Motor rising 1 percent and Kia surging 5.8 percent.

Australian stocks closed at a record high as data showed retailers kicked off the new year on a positive note. The benchmark S&P/ASX 200 Index rose half a percent to 7,698.70, while the broader All Ordinaries index added 0.5 percent to close at 7,959.50.

Real estate stocks advanced on expectations that the Reserve Bank of Australia will fast track rate cuts. Charter Hall Group rallied 2.4 percent and Goodman Group jumped 3.8 percent.

Star Entertainment soared 8.3 percent after half-year profits topped forecasts. South32 gained 4.6 percent after the diversified miner said it is selling its Illawarra metallurgical coal project in New South Wales.

Europe

European stocks are mostly higher on Thursday following the U.S. inflation readings as well as data showeing Spanish inflation cooled sharply in February.

In addition, French inflation eased to its weakest level since September 2021, fueling debate on when the European Central Bank would cut interest rates.

Earlier in the day, France’s payroll employment came in unchanged in the fourth quarter as initially estimated.

Destatis reported that German retail sales decreased 0.4 percent in January from the previous month, confounding expectations for an increase of 0.5 percent.

The unemployment rate in Germany stood at 5.9 percent in February, up from 5.8 percent reported in January.

The U.K.’s FTSE 100 Index and the German DAX Index are both up by 0.5 percent, although the French CAC 40 Index is roughly flat.

CRH, a provider of building materials solutions, has soared after pretax profit rose, reflecting good underlying demand in key end-use markets.

Indivior has also risen. The pharmaceutical company announced that its subsidiary, Indivior Inc., has received final Court approval for its settlement with the Direct Purchaser class, concluding the anti-trust multi-district litigation or MDL matter.

Likewise, GSK has also advanced after it agreed to confidentially settle another lawsuit in California.

British Airways has also risen after reporting a surge in annual profits, while Getlink has jumped in Paris after reporting an increase in full-year profit and revenue.

On the other hand, Vesuvius, an engineered ceramics company, has fallen after reporting a lower profit for the full year.

Staffing and training firm Adecco has also moved to the downside after sales volume weakened at the start of 2024.

Air France-KLM has plunged as it slipped to a loss in the fourth quarter, while semiconductor parts maker Aixtron has plummeted despite fourth quarter revenue coming above expectations.

U.S. Economic Reports

A highly anticipated report released by the Commerce Department on Thursday showed consumer prices in the U.S. increased in line with economist estimates in the month of January.

The Commerce Department said consumer prices rose by 0.3 percent in January after inching up by a revised 0.1 percent in December.

Economists had expected consumer prices to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.

Excluding food and energy prices, core consumer prices climbed by 0.4 percent in January after edging up by a revised 0.1 percent in December. The increase in core prices also matched estimates.

Meanwhile, the report said the annual rate of consumer price growth slowed to 2.4 percent in January from 2.6 percent in December. The slowdown matched expectations.

The annual rate of core consumer price growth also slowed to 2.8 percent in January from 2.9 percent in December, in line with estimates.

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

The report said personal income jumped by 1.0 percent in January, while personal spending crept up by 0.2 percent during the month.

A separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits rose by more than expected in the week ended February 24th.

The report said initial jobless claims climbed to 215,000, an increase of 13,000 from the previous week’s revised level of 202,000.

Economists had expected jobless claims to rise to 210,000 from the 201,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average edged down to 212,500, a decrease of 3,000 from the previous week’s revised average of 215,500.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of February. The Chicago business barometer is expected to rise to 48.0 in February after slipping to 46.0 in January, although a reading below 50 would still indicate contraction.

The National Association of Realtors is due to release its report on pending home sales in the month of January at 10 am ET. Pending home sales are expected to increase by 1.0 percent in January after spiking by 8.3 percent in December.

At 10:50 am ET, Atlanta Federal Reserve President Raphael Bostic is schedled to speak on the economic outlook, monetary policy and the state of the banking industry before the 2024 Banking Outlook Conference.

Chicago Federal Reserve President Austan Goolsbee is due to speak virtually on “Monetary Policy at an Unusual Time” before a webinar event hosted by the Princeton University Bendheim Center for Finance at 11 am ET.

At 1:15 pm ET, Cleveland Federal Reserve President Loretta Mester is scheduled to speak on “Financial Stability/Regulation” before the Columbia University/Bank Policy Institute 2024 Bank Regulation Research Conference.

New York Federal Reserve President John Williams is due to participate in a moderated discussion before the Citizens Budget Commission 92nd Annual Gala at 8:10 pm ET.

Stocks In Focus

Shares of Okta (OKTA) are moving sharply higher in pre-market trading after the identity and access management company reported better than expected fourth quarter results and provided upbeat guidance.

Artificial intelligence software company C3.ai (AI) is also seeing substantial pre-market strength after reporting a narrower than expected fiscal third quarter loss on revenues that exceeded analyst estimates.

Meanwhile, shares of Snowflake (SNOW) are plummeting in pre-market trading after the cloud data company reported fourth quarter results that beat expectations but provided disappointing guidance.