Futures Jump Following Tamer-Than-Expected Consumer Price Inflation Data

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to extend the upward move seen over the course of the previous session.

The futures had been indicating a roughly flat open but jumped into positive territory following the release of a highly anticipated Labor Department report showing consumer prices in the U.S. rose by slightly less than expected in the month of April.

The Labor Department said its consumer price index increased by 0.3 percent in April after rising by 0.4 percent in March. Economists had expected consumer prices to climb by another 0.4 percent.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in April after climbing by 0.4 percent in March. The increase in core prices matched economist estimates.

The report also said the annual rate of consumer price growth slowed to 3.4 percent in April from 3.5 percent in March, in line with expectations.

The annual rate of core consumer price growth decelerated to 3.6 percent in April from 3.8 percent in March. The slowdown also matched estimates.

Following yesterday’s hotter-than-expected producer price inflation data, the report is likely to add to recently renewed optimism about the outlook for interest rates.

Stocks fluctuated over the course of the trading session on Tuesday before eventually ending the day mostly higher. The major averages all moved to the upside, with the Dow bouncing back after snapping an eight-day winning streak on Monday.

The tech-heavy Nasdaq led the way higher, advancing 122.94 points or 0.8 percent to a new record closing high of 16,511.18. The S&P 500 climbed 25.26 points or 0.5 percent to 5,246.68 and the Dow rose 126.60 points or 0.3 percent to 39,558.11.

The higher close on Wall Street came as treasury yields moved to the downside after an early advance, with the yield on the benchmark ten-year note falling to its lowest closing level in over a month.

Treasury yields initially moved higher following the release of a Labor Department report showing producer prices in the U.S. increased by more than expected in the month of April.

The Labor Department said its producer price index for final demand climbed by 0.5 percent in April after a revised 0.1 percent dip in March.

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

The report also said the annual rate of producer price growth accelerated to 2.2 percent in April from a downwardly revised 1.8 percent in March.

The year-over-year producer price growth was expected to inch up to 2.2 percent from the 2.1 percent originally reported for the previous month.

However, while the report initially generated renewed uncertainty about the outlook for interest rates, some economists pointed to the downward revisions to the March data as a positive sign.

“In effect, with the revision, the PPI rise was as expected. Proof of that was in the 2.2%, as-expected rise in the year-on-year PPI,” said FHN Financial Chief Economist Chris Low. “Still, it is not all benign, as there is brewing pressure in the Core PPI.”

Traders also kept an eye on remarks by Federal Reserve Chair Jerome Powell at the annual general meeting of the Foreign Bankers’ Association.

Powell said the central bank needs to “be patient and let restrictive policy do its work,” noting a lack of further progress on inflation during the first quarter.

The Fed chief also said his confidence inflation will slow towards the 2 percent target is “not as high as it was” but reiterated he does not expect the next move to be a rate hike.

With regard to the producer price inflation report, Powell said he’d call the data “mixed” rather than “hot” due the downward revisions to the March data.

Networking stocks moved sharply higher over the course of the session, driving the NYSE Arca Airline Index up by 3.0 percent to its best closing level in over a month.

Computer hardware and semiconductor stocks also saw significant strength on the day, contributing to the advance by the tech-heavy Nasdaq.

Considerable strength was also visible among airline stocks, as reflected by the 1.2 percent gain posted by the NYSE Arca Airline Index.

Gold, brokerage and tobacco stocks also saw notable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are inching up $0.05 to $78.07 a barrel after tumbling $1.10 to $78.02 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,382.50, up $22.60 compared to the previous session’s close of $2,359.90. On Tuesday, gold climbed $16.90.

On the currency front, the U.S. dollar is trading at 155.31 yen compared to the 156.42 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0855 compared to yesterday’s $1.0819.

Asia

Asian stocks ended mixed on Wednesday, with Hong Kong and South Korean markets closed for Buddha’s birthday.

The U.S. dollar and bond yields dipped, while gold edged up after Federal Reserve Chair Jerome Powell said on Tuesday that the central bank is unlikely to raise its key interest rate to tackle elevated inflation.

After producer price data for April surprised on the upside, traders looked ahead to key U.S. CPI data due later in the day for clues on the Federal Reserve’s next steps.

Oil prices rose on expectations for higher demand after industry data showed U.S. crude and gasoline inventories fell in the week ended May 10.

Chinese markets fell notably as the Biden administration announced steep tariff increases on a wide range of Chinese imports and the country’s central bank left a key policy rate unchanged when rolling over maturing medium-term lending facility (MLF) loans.

The benchmark Shanghai Composite Index dropped 0.8 percent to 3,119.90 despite supportive news regarding China’s property sector.

Bloomberg News said that China is considering a proposal to have local governments across the country buy millions of unsold homes.

Japanese shares ended on a flat note as investors boosted bets for an interest rate hike by the Bank of Japan (BOJ) by July.

The Nikkei 225 Index finished marginally higher at 38,385.73 ahead of the release of the first estimate of the domestic GDP for the January-March period on Thursday. The broader Topix Index ended with a negative bias at 2,730.88.

Chip-linked shares advanced, with Advantest and Tokyo Electron both surging 1.9 percent.

Sony Group shares soared 8.2 percent after the conglomerate reported better-than-expected fourth quarter results and said it would conduct a five-for-one stock split and buy back up to 2.46 percent of its shares worth 250 billion yen.

Australian markets closed higher after data showed wages grew less than expected in the first quarter, denting the prospect of another rate hike from the Reserve Bank of Australia.

The benchmark S&P ASX 200 Index rose 0.4 percent to 7,753.70, while the broader All Ordinaries Index closed up 0.32 percent at 8,020.90.

Miners topped the gainers list after the federal budget included billions of dollars in tax credits for the critical minerals industry.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index slid 0.8 percent to 11,525.88.

Europe

European stocks are mostly higher on Wednesday as investors digest a slew of mixed earnings reports as well as the U.S. consumer price inflation data.

Meanwhile, the euro area economy recovered as estimated in the first quarter after contracting for two straight quarters, a report from Eurostat showed today.

GDP grew 0.3 percent sequentially, reversing the 0.1 percent dips in each of the third and fourth quarters of 2023. The increase matched the preliminary flash estimates released on April 30. On a yearly basis, economic growth improved to 0.4 percent from 0.1 percent.

Separately, Eurostat figures revealed that Eurozone industrial production rose 0.6 percent month-on-month in March, above expectations for 0.5 percent growth.

While the German DAX Index has advanced by 0.8 percent, the U.K.’s FTSE 100 Index is up by 0.4 percent and the French CAC 40 Index is up by 0.2 percent.

In corporate news, Poland’s InPost has shown a substantial move to the upside after its first quarter core profit jumped 36 percent.

British credit data firm Experian has also soared after it forecast annual organic revenue growth of between 6 percent and 8 percent for fiscal year 2025.

Drinks company Britvic has also surged after posting a jump in interim profit and revenue and announcing a £75 million share buyback.

Engineering group Hunting has also skyrocketed on news of a new order win worth $145 million from the Kuwait Oil Company.

Telecom group Vodafone has also moved sharply higher after launching a €500 million share buyback program.

German diversified group Merck KGaA has also spiked after its first quarter adjusted profit fell less than expected.

Lender Commerzbank has also jumped after reporting its best quarterly profit in more than 10 years and upgrading the outlook for lending income this year.

Meanwhile, ABN AMRO Bank shares have slumped . The Dutch lender reported a weaker capital ratio in the first quarter due to an increase in risk-weighted assets.

Finland’s Neste has also plunged. The biofuels maker lowered its 2024 margin guidance for renewable products.

Thyssenkrupp shares have also tumbled as the conglomerate cut its annual sales and profit forecasts for the second time in three months.

U.S. Economic Reports

A highly anticipated report released by the Labor Department on Wednesday showed consumer prices in the U.S. rose by slightly less than expected in the month of April.

The Labor Department said its consumer price index increased by 0.3 percent in April after rising by 0.4 percent in March. Economists had expected consumer prices to climb by another 0.4 percent.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in April after climbing by 0.4 percent in March. The increase in core prices matched economist estimates.

The report also said the annual rate of consumer price growth slowed to 3.4 percent in April from 3.5 percent in March, in line with expectations.

The annual rate of core consumer price growth decelerated to 3.6 percent in April from 3.8 percent in March. The slowdown also matched estimates.

Meanwhile, the Commerce Department released a separate report showing retail sales in the U.S. unexpectedly came in flat in the month of April.

The Commerce Department said retail sales were virtually unchanged in April after climbing by a downwardly revised 0.6 percent in March.

Economists had expected retail sales to rise by 0.4 percent compared to the 0.7 percent increase originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales edged up by 0.2 percent in April after jumping by 0.9 percent in March. The uptick matched economist estimates.

The Federal Reserve Bank of New York also released a report showing regional manufacturing activity unexpectedly contracted at a slightly faster rate in the month of May.

The New York Fed said its general business conditions index edged down to a negative 15.6 in May from a negative 14.3 in April, with a negative reading indicating contraction. Economists had expected the index to rise to a negative 10.0.

Looking ahead, the New York Fed said optimism about the outlook remained subdued, although firms still expect conditions to improve over the next six months.

At 10 am ET, the National Association of Home Builders is due to release its report on homebuilder confidence in the month of May. The housing market index is expected to come in unchanged at 51.

The Commerce Department is also scheduled to release its report on business inventories in the month of March at 10 a ET. Business inventories are expected to edge down by 0.1 percent in March after climbing by 0.4 percent in February.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended May 10th. Crude oil inventories are expected to decrease by 1.4 million barrels after falling by 1.4 million barrels in the previous week.

Minneapolis Federal Reserve President Neel Kashkari is scheduled to participate in a fireside chat on the economy at 12 pm ET.

At 3:20 pm ET, Federal Reserve Board Governor Michelle Bowman is due to speak on “Innovation and the Evolving Financial Landscape” at the DC Blockchain Summit 2024.