Mixed Inflation Data May Lead To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to give back ground after moving mostly higher over the two previous sessions.

The futures remained in negative territory following the release of the Labor Department’s closely watched report on consumer price inflation in the month of August.

While the report showed consumer prices increased in line with economist estimates, core consumer prices rose by slightly more than expected.

The Labor Department said its consumer price index rose by 0.2 percent in August, matching the uptick seen in July as well as economist estimates.

However, core consumer prices, which exclude food and energy prices, climbed by 0.3 percent in August after rising by 0.2 percent in July. Economists had expected core prices to rise by another 0.2 percent.

The Federal Reserve is still likely to lower interest rates next week, but the bigger than expected increase by core consumer prices may be seen as reducing the chances the central bank lowers rates by 50 basis points.

Following the report, CME Group’s FedWatch Tool is indicating an 85.0 percent chance of a quarter point rate cut and just a 15.0 percent chance of a half-point rate cut.

At the same time, the report said the annual rate of consumer price growth slowed to 2.5 percent in August from 2.9 percent in July. Economists had expected the year-over-year growth to decelerate to 2.6 percent.

The annual rate of core consumer price growth was unchanged from the previous month at 3.2 percent in August, in line with economist estimates.

Stocks fluctuated over the course of the trading session on Tuesday but managed to end the day mostly higher. The Nasdaq and the S&P 500 added to the strong gains posted during Monday’s session, although the narrower Dow bucked the uptrend.

The Nasdaq and the S&P 500 saw further upside going into the close, reaching new highs for the session. The Nasdaq climbed 141.28 points or 0.8 percent to 17,025.88 and the S&P 500 rose 24.47 points or 0.5 percent to 5,495.52, but the Dow dipped 92.63 points or 0.2 percent to 40,736.96.

The volatility seen over the course of the trading day came as traders looked ahead to the release of closely watched inflation data in the coming days.

The data could impact the outlook for interest rates ahead of the Federal Reserve’s monetary policy meeting next week.

The Fed is almost universally expected to begin lowering interest rates next week, but there is some debate about the size of the rate cut.

Software stocks turned in a strong performance on the day, resulting in a 1.9 percent jump by the Dow Jones U.S. Software Index.

Oracle (ORCL) led the sector higher, soaring by 11.4 percent after reporting better than expected fiscal first quarter results and announcing a strategic partnership with Amazon Web Services.

Considerable strength also emerged among networking stocks, as reflected by the 1.9 percent surge by the NYSE Arca Networking Index.

Gold, commercial real and semiconductor stocks also moved notably higher over the course of the session, while a steep drop by the price of crude oil weighed on energy stocks.

Banking stocks also showed a significant move to the downside on the day, dragging the KBW Bank Index down by 1.8 percent.

Commodity, Currency Markets

Crude oil futures are jumping $1.45 to $67.20 a barrel after plunging $2.96 to $65.75 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,540.30, down $2.80 compared to the previous session’s close of $2,543.10. On Tuesday, gold climbed $10.40.

On the currency front, the U.S. dollar is trading at 142.45 yen compared to the 142.44 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1005 compared to yesterday’s $1.1020.

Asia

Asian stocks declined on Wednesday as investors watched the latest updates on the Trump-Harris presidential debate and braced for U.S. consumer price inflation data that could influence the Federal Reserve’s policy moves next week.

Analysts expect the headline CPI to have risen 0.2 percent month-on-month in August, unchanged from the previous month.

The dollar dropped, while gold gained ground due to dovish Fed expectations. Current expectations lean towards a 25-basis point cut, but that may not be enough to get ahead of the economy.

Oil prices rose more than 1 percent in Asian trading after having dropped to nearly three years low in the New York session on concerns over a weak demand outlook.

Chinese markets hit a seven-month low as the U.S. House of Representatives approved The BIOSECURE Act, restricting U.S. ties with specific Chinese biotech companies to safeguard national security.

The benchmark Shanghai Composite Index fell 0.8 percent to 2,721.80. Hong Kong’s Hang Seng Index settled 0.7 percent lower at 17,108.71 after having fallen to a nearly one-month low earlier.

Japanese markets tumbled, as the yen surged to an eight-month high after Bank of Japan board member Junko Nakagawa signaled readiness to raise rates further if the economy and inflation move in line with forecasts.

The Nikkei 225 Index slumped 1.5 percent to 35,619.77, while the broader Topix Index closed 1.8 percent lower at 2,530.67. Automakers Honda Motor, Toyota, Nissan and Mitsubishi Motors dove 3-4 percent.

Seoul stocks ended lower for a seventh consecutive session due to selling by foreign investors. The Kospi dropped 0.4 percent to 2,513.37, dragged down by financials and tech stocks.

Samsung Electronics gave up 2 percent, KB Financial Group plummeted 6 percent and Shinhan Financial Group plunged 6.2 percent.

Australian markets ended modestly lower after Reserve Bank of Australia Assistant Governor Sarah Hunter said the labor market is still tight relative to full employment.

The benchmark S&P/ASX 200 Index slipped 0.3 percent to 7,987.90, with banks and energy stocks leading losses. The broader All Ordinaries Index settled 0.3 percent lower at 8,195.20.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index finished marginally lower at 12,632.35.

Europe

European stocks are mostly higher on Wednesday as traders digest the U.S. consumer inflation data. The focus is also on the European Central Bank (ECB), which is likely to reduce lower borrowing costs for the second time this year on Thursday.

The pan European STOXX 600 Index is up by 0.5 percent at 510.30 after falling half a percent on Tuesday.

The German DAX Index is also up by 0.5 percent, while the French CAC 40 Index is up by 0.3 percent and the U.K.’s FTSE 100 Index is up by 0.2 percent.

The British pound ticked lower after official data showed the U.K. economy unexpectedly stagnated in July.

Real gross domestic product showed nil growth for the second straight month as falls in production and construction was offset by an increase in services output, the Office for National Statistics reported. GDP was forecast to grow 0.2 percent.

In the three months to July, GDP advanced 0.5 percent with strong contribution from services output.

Commerzbank shares has moved sharply higher after Italian lender UniCredit took a 9 percent stake in the German bank and said it will seek approval to potentially buy more.

Online property website Rightmove has also moved to the upside after rejecting an initial cash and shares bid from Australia’s REA Group.

On the other hand, Santander Bank Polska has plunged after parent Banco Santander sold a 5.2 percent stake in its Polish unit.

Pest-control giant Rentokil Initial has also moved sharply lower after a profit warning.

U.S. Economic Reports

While the Labor Department released a report on Wednesday showing consumer prices in the U.S. increased in line with estimates in the month of August, the annual rate of consumer price growth slowed by slightly more than expected.

The Labor Department said its consumer price index rose by 0.2 percent in August, matching the uptick seen in July as well as economist estimates.

Meanwhile, the report said the annual rate of consumer price growth slowed to 2.5 percent in August from 2.9 percent in July. Economists had expected the year-over-year growth to decelerate to 2.6 percent.

With the bigger than expected slowdown, consumer prices saw the smallest 12-month increase since February 2021.

The Labor Department also said core consumer prices, which exclude food and energy prices, climbed by 0.3 percent in August after rising by 0.2 percent in July. Economists had expected core prices to rise by another 0.2 percent.

The annual rate of core consumer price growth was unchanged from the previous month at 3.2 percent in August, in line with economist estimates.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on crude oil inventories in the week ended September 6th.

Crude oil inventories are expected to inch up by 0.9 million barrels after plunging by 6.9 million barrels in the previous week.

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

Stocks In Focus

Shares of Dave & Buster’s (PLAY) are moving sharply higher in pre-market trading after the restaurant and entertainment business reporter better than expected fiscal second quarter earnings.

Home furnishings retailer Williams-Sonoma (WSM) is also likely to see initial strength after Jefferies upgraded its rating on the company’s stop to Buy from Hold.

Meanwhile, shares of GameStop (GME) are seeing substantial pre-market weakness after the video game retailer reported a steep drop by fiscal second quarter sales.

Trump Media & Technology (DJT) may also come under pressure amid criticism of former President Donald Trump’s performance in his debate against Vice President Kamala Harris.