Hotter-Than-Expected Inflation Data Likely To Weigh On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Thursday, with stocks likely to extend the downward trend seen over the past several sessions.

The futures came under pressure following the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of September.

The report showed consumer prices rose by more than expected in September, leading to a spike in treasury yields and ongoing concerns about the outlook for interest rates.

The Labor Department said its consumer price index rose by 0.4 percent in September after inching up by 0.1 percent in August. Economists had expected consumer prices to edge up by 0.2 percent.

Excluding food and energy prices, core consumer prices climbed by 0.6 percent for the second month compared to expectations for a 0.5 percent advance.

The report also showed the annual rate of growth by consumer prices slowed to 8.2 percent in September from 8.3 percent in August, although the annual rate of growth by core prices accelerated to 6.6 percent from 6.3 percent.

U.S. stocks failed to hold early gains and ended lower on Wednesday, with traders reacting to the minutes from the Federal Reserve’s most recent policy meeting and looking ahead to crucial consumer price inflation data.

Despite spending much of the day’s trading session in positive territory, the major averages all ended on a negative note.

The Dow, which climbed more than 200 points to 29,455.12 around noon, ended the day with a loss of 28.34 points or 0.1 percent at 29,210.85. The S&P 500 ended lower by 11.81 points or 0.3 percent at 3,577.03, off the day’s high of 3,608.34, while the Nasdaq, which advanced to 10,494.53, settled at 10,417.10, posting a loss of 9.09 points or 0.1 percent.

Walgreens Boots Alliance, Walmart, Verizon, Cisco Systems, Merck, Boeing and Honeywell International ended weak.

Shares of PepsiCo rallied 4.2 percent after the company raised its annual guidance and reported stronger-than-expected quarterly earnings.

Shares of Moderna Inc. climbed more than 8 percent. The company announced that it would team up with Merck to develop and sell a cancer drug.

JP Morgain gained about 1.7 percent. Coca-Cola, Intel and Nike gained 1 to 1.3 percent.

The minutes from the Fed meeting showed policymakers pushed back on the idea of a pivot, choosing to give priority to their commitment to combat inflation.

The members lowered their projections for the economy and expect GDP to grow at just a 0.2 percent annualized pace in 2022 and just 1.2 percent in 2023, well below trend and a big drop from 2021, which saw the strongest gains since 1984.

The summary of economic projections at the meeting pointed to a “terminal rate” or end point of rate increases to be around 4.6 percent.

Meanwhile, data released by the Labor Department today showed the Producer Price Index for final demand in the U.S. increased by 0.4 percent month-over-month in September, rising for the first time in three months. The index had slipped by a revised 0.2 percent in August. Year-on-year, the PPI jumped 8.5 percent in September.

Commodity, Currency Markets

Crude oil futures are falling $0.90 to $86.37 a barrel after plunging $2.08 to $87.27 a barrel on Wednesday. Meanwhile, after falling $8.50 to $1,677.50 an ounce in the previous session, gold futures are sliding $14.50 to $1,663 an ounce.

On the currency front, the U.S. dollar is trading at 147.44 yen versus the 146.91 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $0.9643 compared to yesterday’s $0.9703.

Asia

Asian shares retreated on Thursday as investors awaited U.S. consumer price inflation data later in the day that could offer more clarity on whether the Federal Reserve needs restrictive monetary policy to lower inflation that is at multi-decade highs.

Concerns about inflation continue to rise after overnight data showed U.S. producer price inflation rose more than expected in September.

The dollar and gold traded in a tight range in Asian trading, while oil edged higher after three consecutive sessions of losses.

China’s Shanghai Composite Index slipped 0.3 percent to 3,016.36 ahead of a key Party congress where President Xi Jinping is expected to extend his leadership. Hong Kong’s Hang Seng Index closed 1.9 percent lower at 16,389.11.

Japanese stocks closed lower amid recession fears and concerns surrounding aggressive policy tightening by the Federal Reserve. The Nikkei 225 Index fell 0.6 percent to 26,237.42, while the broader Topix slid 0.8 percent to 1,854.61.

The yen hit a 24-year low against the dollar as the latest Fed meeting minutes underscored the central bank’s commitment to taming “unacceptably high” inflation and Fed Governor Michelle Bowman said she would continue to support aggressive rate hikes.

Closer to home, Japanese corporate goods prices grew the most in five months in September, Bank of Japan data showed earlier in the day.

Conglomerate Toshiba Corp. soared 7.4 percent on reports of a possible $19 billion buyout. Tech stocks rebounded, with Advantest, Tokyo Electron and Screen Holdings rising 1-2 percent.

Seoul stocks slumped on concerns that combative monetary tightening policies in major economies could tip the global economy into a recession. The Kospi fell 1.8 percent to 2,162.87, with heavyweights Samsung Electronics, Hyundai Motor and LG Chem falling 1-3 percent.

Australian markets ended marginally lower, dragged down by mining and energy stocks. The big banks rose 2-3 percent, helping limit the downside in the broader market. Qantas surged 8.7 percent after the airline forecast stronger-than-expected first-half profit.

Europe

European stocks have moved to the downside as the hotter-than-expected U.S. inflation data has contributed to ongoing concerns about the outlook for interest rates.

Closer to home, the European Central Bank is expected to raise key interest rate by at least another 75 basis points at its late October meeting after Eurozone inflation moved into a double-digit 10.0 percent for the first time on record in September.

German consumer price inflation accelerated to 10.0 percent in September from 7.9 percent in August, final data from Destatis showed, matching the flash estimate.

EU harmonized inflation rose sharply to 10.9 percent, in line with estimate, from 8.8 percent in the previous month.

While the French CAC 40 Index has slumped by 1.7 percent, the U.K.’s FTSE 100 Index is down by 1.1 percent and the German DAX Index is down by 0.4 percent.

Budget airline EasyJet has fallen in London after a warning that it expects to post a third straight annual loss.

Infineon and ASML Holding has also moved lower after chip-making technology supplier Applied Materials Inc. cut its profit estimates, saying U.S. export restrictions to China would result in a $250 million-$550 million loss in net sales in the quarter ending October 30.

German sugar producer Suedzucker has also slumped despite posting a sharp increase in quarterly earnings and forecasting increased full-year profits.

On the other hand, Electrolux has advanced as the Swedish appliance manufacturer agreed to sell its idle factory in Memphis in the United States for $82.5 million.

Gambling firm Entain has also jumped as it forecast improved online gaming revenue in the fourth quarter on the prospect of the soccer World Cup set to start next month.

Oxford Instruments, a provider of high-technology products and systems, has also soared after saying it made good progress in the first half of the year.

U.S. Economic Reports

Consumer prices in the U.S. increased by more than expected in the month of September, according to a highly anticipated report released by the Labor Department on Thursday.

The Labor Department said its consumer price index rose by 0.4 percent in September after inching up by 0.1 percent in August. Economists had expected consumer prices to edge up by 0.2 percent.

Excluding food and energy prices, core consumer prices climbed by 0.6 percent for the second month compared to expectations for a 0.5 percent advance.

The report also showed the annual rate of growth by consumer prices slowed to 8.2 percent in September from 8.3 percent in August, although the annual rate of growth by core prices accelerated to 6.6 percent from 6.3 percent.

A separate report released by the Labor Department on Thursday showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended October 8th.

The Labor Department said initial jobless claims rose to 228,000, an increase of 9,000 from the previous week’s unrevised level of 219,000. Economists had expected jobless claims to inch up to 225,000.

The report showed the less volatile four-week moving average also crept up to 211,500, an increase of 5,000 from the previous week’s unrevised average of 206,500.

At 11 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended October 7th.

Crude oil inventories are expected to increase by 1.8 million barrels after falling by 1.4 million barrels in the previous week.

The Treasury Department is also due to announce the details of this month’s auction of twenty-year bonds at 11 am ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $18 billion worth of thirty-year bonds.

Atlanta Federal Reserve President Raphael Bostic is also due to give welcoming remarks at the Atlanta Fed’s Center for Human Capital Studies 12th annual employment conference at 1 pm ET.