Positive Reaction To CPI Data May Lead To Rebound On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to regain ground following the pullback seen over the two previous sessions.

The futures advanced following the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of February.

The Labor Department said its consumer price index climbed by 0.4 percent in February after rising by 0.3 percent in January. The increase matched economist estimates.

Excluding food and energy prices, core consumer prices also rose by 0.4 percent in February, matching the increase seen in January. Economists had expected core prices to rise by 0.3 percent.

The report also said the annual rate of consumer price growth ticked up to 3.2 percent in February from 3.1 percent in January. The year-over-year growth was expected to be unchanged.

Meanwhile, the annual rate of core consumer price growth slowed to 3.8 percent in February from 3.9 percent in January. Economists had expected the pace of growth to decelerate to 3.7 percent.

While core price growth slowed by slightly less than expected, the slowdown may still add to optimism about the outlook for interest rates.

Treasury yields saw considerable volatility immediately following the release of the report but have moved modestly lower since then.

After coming under pressure over the course of last Friday’s session, stocks saw further downside in early trading on Monday. The major averages regained ground as the day progressed, however, with the Dow closing modestly higher.

While the Dow inched up 46.97 points or 0.1 percent to 38,769.66 after falling nearly 240 points in early trading, the S&P 500 edged down 5.75 points or 0.1 percent to 5,117.94 and the Nasdaq fell 65.84 points or 0.4 percent to 16,019.27.

The early weakness on Wall Street came amid uncertainty about the outlook for interest rates ahead of the release of key economic data.

On Thursday, the Labor Department is due to release a separate report on producer price inflation in the month of February.

Producer prices are expected to rise by 0.3 percent in February, matching the increase seen in January, while the annual rate of producer price growth is expected to accelerate to 1.1 percent from 0.9 percent.

Reports on retail sales, industrial production and consumer sentiment are also likely to attract attention in the coming days.

Despite the recovery attempt by the broader markets, semiconductor stocks still saw significant weakness on the day, with the Philadelphia Semiconductor Index falling by 1.4 percent.

Within the sector, semiconductor equipment maker Applied Materials (AMAT) slumped by 2.0 percent despite raising its quarterly cash dividend from $0.32 to $0.40 per share.

Notable weakness also remained visible among steel stocks, as reflected by the 1.2 percent loss posted by the NYSE Arca Steel Index.

On the other hand, gold stocks showed a strong move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 2.5 percent.

The rally by gold stocks came amid a modest increase by the price of the precious metal, with gold for April delivery inching up $3.10 to $2,188.60 an ounce.

Commodity, Currency Markets

Crude oil futures are slipping $0.05 to $77.88 a barrel after edging down $0.08 to $77.93 a barrel on Monday. Meanwhile, after inching up $3.10 to $2,188.60 an ounce in the previous session, gold futures are dipping $6.20 to $2,182.40 an ounce.

On the currency front, the U.S. dollar is trading at 147.26 yen compared to the 146.95 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0932 compared to yesterday’s $1.0926.

Asia

Asian stocks ended mixed on Tuesday following sluggish overnight cues from Wall Street and Europe. The upside, if any, remained capped before key U.S. inflation data out later in the day that might offer some clarity over the path of interest rates.

The dollar steadied and gold slipped from record highs, while oil prices rose about half a percent ahead of the release of monthly reports from producer group OPEC and the International Energy Agency, the world’s most closely watched forecasters of oil demand growth.

China’s Shanghai Composite Index dropped 0.4 percent to 3,055.94 on persistent fears over weak demand in the country.

Hong Kong’s Hang Seng Index soared 3.1 percent to 17,093.50, helped by gains in the technology sector.

Property developer China Vanke surged over 10 percent amid expectations that large banks may step up support for the company.

Japanese markets cut steep early losses to end on a flat note as the yen slipped in reaction to BoJ Governor Ueda’s dovish remarks, heading into next week’s policy meeting.

Ueda noted that while the economy was on a path of moderate recovery, there are pockets of weakness in consumption.

In addition, Finance Minister Shunichi Suzuki said the Japanese economy hasn’t completely overcome deflation yet.

The Nikkei 225 Index hit an over two-week low before finishing marginally lower at 38,797.51. The broader Topix Index slipped 0.4 percent to 2,657.24 after the release of mildly stronger-than-expected producer price inflation data.

Seoul stocks rose notably, with the Kospi climbing 0.8 percent to 2,681.81. LG Electronics jumped 2.4 percent after it acquired a stake in Silicon Valley startup Bear Robotics.

Australian markets ended slightly higher, giving up some initial gains. The benchmark S&P/ASX 200 Index settled 0.1 percent higher at 7,712.50, led by gold miners and technology stocks. The broader All Ordinaries Index edged up 0.1 percent to 7,973 after Monday’s big plunge.

Europe

European stocks have moved higher on Tuesday after having fallen for the first time in three days in the previous session due to uncertainty about the outlook for interest rates.

There was some cheer on the economic front, with German inflation easing in February as initially expected. Elsewhere, weak U.K. employment and wage growth data spurred hopes of rate cuts.

While the U.K.’s FTSE 100 Index has jumped by 1.1 percent, the German DAX Index is up by 0.4 percent and the French CAC 40 Index is up by 0.1 percent.

The British pound has fallen against rivals after data showed Britain’s unemployment rate rose for the first time since July and wage growth eased, adding to evidence of a cooling labor market.

In corporate news, Generali shares have moved to the upside after the Italian lender posted its best profit ever in 2023.

Infrastructure products and services provider Hill & Smith has also jumped after reporting record annual results.

Oracle shares have also moved sharply higher in Frankfurt after the U.S. company posted better-than-expected quarterly earnings.

Chemical company Wacker Chemie AG has also soared despite forecasting a slight decline in 2024 sales and earnings.

Meanwhile, homebuilder Persimmon has tumbled after it narrowly missed market views for last year’s pretax profit and revenue.

U.S. Economic Reports

Consumer prices in the U.S. increased in line with economist estimates in the month of February, according to a report released by the Labor Department on Tuesday.

The Labor Department said its consumer price index climbed by 0.4 percent in February after rising by 0.3 percent in January. The advance matched expectations.

Excluding food and energy prices, core consumer prices also rose by 0.4 percent in February, matching the increase seen in January. Economists had expected core prices to rise by 0.3 percent.

The report also said the annual rate of consumer price growth ticked up to 3.2 percent in February from 3.1 percent in January. The year-over-year growth was expected to be unchanged.

Meanwhile, the annual rate of core consumer price growth slowed to 3.8 percent in February from 3.9 percent in January. Economists had expected the pace of growth to decelerate to 3.7 percent.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $39 billion worth of ten-year notes.

Stocks In Focus

Shares of Oracle (ORCL) are moving sharply higher in pre-market trading after the software giant reported better than expected fiscal third quarter earnings and strong cloud revenue growth.

Biopharmaceutical company Ventyx Biosciences (VTYX) is also likely to see initial strength after announcing clinical updates from its novel NLRP3 inhibitor portfolio. Wells Fargo and Oppenheimer both upgraded their ratings on the company’s stock.

On the other hand, shares of Southwest Airlines (LUV) are likely to come under pressure after the airline said it is “reevaluating all prior full year 2024 guidance, including the expectation for capital spending” due to aircraft delivery delays by Boeing (BA).