Tame Inflation Data May Lead To Initial Rebound On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Wednesday, with stocks likely to regain ground following the pullback seen in the previous session.

The futures edged higher after the Labor Department released closely watched consumer price inflation data that came in line with economist estimates.

The Labor Department said its consumer price index crept up by 0.2 percent in October, matching the upticks seen in each of the three previous months as well as expectations.

The report also said the annual rate of consumer price growth accelerated to 2.6 percent in October from 2.4 percent in September. The faster growth also came in line with economist estimates.

Excluding food and energy prices, core consumer prices climbed by 0.3 percent in October, matching the increases seen in each of the two previous months along with expectations.

The annual rate of core consumer price growth was unchanged from the previous month at 3.3 percent, which also in line with estimates.

The data matching expectations may lead to renewed confidence the Federal Reserve will continue lowering interest rates next month.

CME Group’s FedWatch Tool is currently indicating a 72.0 percent chance of another quarter point rate cut and a 28.0 percent chance rates will be left unchanged.

A pullback by treasury yields in reaction to the data may also generate buying interest, with the yield on the benchmark ten-year note giving back ground after reaching its highest closing level in four months on Tuesday.

Following the strong upward move seen in reaction to last week’s last elections, stocks gave back ground during trading on Tuesday. The major averages fluctuated over the course of the trading session before eventually closing in negative territory.

The Dow underperformed its counterparts, slumping 382.15 points or 0.9 percent to 43,910.98. The S&P 500 dipped 17.36 points or 0.3 percent to 5,983.99 and the tech-heavy Nasdaq edged down 17.36 points or 0.1 percent to 19,281.40.

The pullback on Wall Street may partly have reflected profit taking, as some traders looked to cash in on the recent strength in the markets.

The major averages have rallied to new record highs in recent days following former President Donald Trump’s decisive victory in last week’s presidential election.

Trump’s return to the White House is expected to be positive for corporations and the U.S. economy, although there are some concerns about the effect planned tariff increases will have on inflation.

Nonetheless, traders seemed reluctant to make more significant moves ahead of the release of closely watched economic data in the coming days.

A highly anticipated report on consumer price inflation is due to be released on Wednesday, while reports on producer price inflation, retail sales and industrial production are likely to attract attention later in the week.

“Inflation-related data releases take on heightened importance as markets try to ascertain whether the Fed can, absent weakness in the labor market, deliver the rate cut cycle it had expected just a few months ago— and whether the already extended market can withstand the possibility that the Fed could remain higher for longer,” said Quincy Krosby, Chief Global Strategist for LPL Financial.

Housing stocks moved sharply lower on the day, with the Philadelphia Housing Sector Index plunging by 2.7 percent.

Substantial weakness was also visible among steel stocks, as reflected by the 2.6 percent nosedive by the NYSE Arca Steel Index.

Computer hardware stocks also showed a significant move to the downside, dragging the NYSE Arca Computer Hardware Index down by 2.0 percent.

Telecom, biotechnology and gold stocks also saw considerable weakness, while software stocks showed a notable move to the upside.

Commodity, Currency Markets

Crude oil futures are rising $0.38 to $68.50 a barrel after inching up $0.08 to $68.12 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,619.40, up $13.10 compared to the previous session’s close of $2,606.30. On Tuesday, gold fell $11.40.

On the currency front, the U.S. dollar is trading at 154.52 yen compared to the 154.61 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0636 compared to yesterday’s $1.0623.

Asia

Asian stocks hit two-month lows on Wednesday as investors fretted about the impact of U.S. President-elect Donald Trump’s proposed tariffs on inflation and interest rates.

Trump’s choice of China hawks in his Cabinet and China’s faltering growth also kept investors on the sidelines.

U.S. Treasury yields pushed higher and the dollar rally gained further momentum as investors awaited key U.S. consumer and producer inflation readings this week for hints of a possible Federal Reserve rate cut in December.

Traders are currently pricing in about two Fed rate cuts through June, against almost four seen at the start of last week.

Gold traded around $2,600 per ounce levels in Asian trading, while oil edged up slightly on signs of near-term supply tightness but remained near their lowest in two weeks, a day after OPEC revised down its forecasts for global oil demand this year and next.

China’s Shanghai Composite Index rose 0.5 percent to 3,439.28 as Beijing began marketing its first U.S. dollar sovereign bonds in three years in Saudi Arabia.

The yuan bounced off a more than three-month low against the dollar, lifted by firmer-than-expected official midpoint guidance.

Hong Kong’s Hang Seng Index dipped 0.1 percent to 19,823.45, extending declines for a fourth day running.

Japanese markets tumbled as five-year government bond yield hit a 15-year high amid increased bets for the Bank of Japan to raise interest rates.

The Nikkei 225 Index dove 1.7 percent to 38,721.66 as data revealed Japan’s producer price index rose by 3.4 percent year-on-year in October, beating expectations. The broader Topix Index settled 1.2 percent lower at 2,708.42, while the yen hovered near the key level of 155 per greenback.

Seven & i Holdings surged 11.8 percent after the owner of 7-Eleven said it has received a buyout proposal from a member of its founding Ito family.

Seoul stocks lost ground to hit a one-year low on growing concerns over policy uncertainty under the incoming U.S. Trump administration. The Kospi plunged 2.6 percent to 2,417.08, extending its losing streak to a fourth day.

Market heavyweight Samsung Electronics slumped 4.5 percent amid lingering concerns over its business competitiveness in the chip market. Peer SK Hynix gave up 1.6 percent.

Australian markets fell for a third consecutive session amid a broad sell-off. The benchmark S&P/ASX 200 Index dropped 0.8 percent to 8,193.40 despite Commonwealth Bank of Australia reporting first-quarter cash earnings slightly ahead of market consensus. The broader All Ordinaries Index closed 0.8 percent lower at 8,450.90.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index slid 0.6 percent to 12,674.49.

Europe

European stocks have seen further downside on Wednesday after suffering heavy losses in the previous session amid concerns that Donald Trump’s protectionist policies would put upward pressure on inflation and hamper global growth.

While the German DAX Index is down by 0.6 percent, the French CAC 40 Index is down by 0.5 percent and the U.K.’s FTSE 100 Index is down by 0.2 percent.

In corporate news, Dutch lender ABN AMRO Bank has moved notably lower after reporting a decrease in third-quarter net profit.

Credit data firm Experian has also moved to the downside after pretax profit fell six percent in the first half.

Meanwhile, Just Eat Takeaway.com shares have soared. The food delivery company said that it is selling its U.S. business Grubhub to New York-based Wonder Group in a deal valued at $650 million.

Smiths Group shares have also moved sharply higher after the engineering group resumed and increased its share buyback program.

Babcock International has also spiked as the weapons maker reported a sharp jump in half-year profits and backed FY25 expectations.

Flutter Entertainment, a leading operator in the online sports betting and iGaming industry, has also jumped after reporting robust third-quarter results.

Siemens Energy has also surged after the German utility sector supplier raised its mid-term targets and set a new record for its order book.

RWE has also moved sharply higher after the company announced a €1.5 billion share buyback program.

U.S. Economic News

A closely watched report released by the Labor Department on Wednesday showed consumer prices in the U.S. rose in line with economist estimates in the month of October.

The Labor Department said its consumer price index crept up by 0.2 percent in October, matching the upticks seen in each of the three previous months as well as expectations.

The report also said the annual rate of consumer price growth accelerated to 2.6 percent in October from 2.4 percent in September. The faster growth also came in line with economist estimates.

Excluding food and energy prices, core consumer prices climbed by 0.3 percent in October, matching the increases seen in each of the two previous months along with expectations.

The annual rate of core consumer price growth was unchanged from the previous month at 3.3 percent, which also in line with estimates.

At 9:45 am ET, Dallas Federal Reserve President Lorie Logan is due to give opening remarks before a hybrid “Energy and the Economy: Meeting Rising Energy Demand” Conference.

St. Louis Federal Reserve President Alberto Musalem is scheduled to speak on the U.S. economy and monetary policy before the Economic Club of Memphis at 1 pm ET.

At 1:30 pm ET, Kansas City Federal Reserve President Jeffrey Schmid is due to give the luncheon keynote before the “Energy and the Economy: Meeting Rising Energy Demand” Conference.