Tamer-Than-Expected Inflation Data May Lead To Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to move back to the upside after ending the previous session mostly lower.

The upward momentum on Wall Street comes following the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of July.

The report said the annual rate of growth by consumer prices accelerated to 3.2 percent in July from 3.0 percent in June. Economists had expected the pace of price growth to accelerate to 3.3 percent.

The Labor Department also said its consumer price index rose by 0.2 percent on a monthly basis in July, matching the uptick seen in June as well as expectations.

Excluding food and energy prices, core consumer prices also rose by 0.2 percent for the second straight month in July, in line with estimates.

Meanwhile, the annual rate of growth by core consumer prices slowed to 4.7 percent in July from 4.8 percent in June. The rate of growth was expected to be unchanged.

The slower than expected annual rate of growth is likely to reinforce expectations the Federal Reserve will leave interest rates unchanged next month.

Potentially adding to optimism about the outlook for rates, a separate Labor Department report showed first-time claims for U.S. unemployment benefits rose by much more than expected in the week ended August 5th.

Stocks fluctuated over the course of the trading session on Wednesday before ending the day mostly lower. The major averages all moved to the downside, with the Nasdaq and the S&P 500 falling to their lowest closing levels in a month.

The major averages came under pressure going into the close, finishing the session firmly in the red. The tech-heavy Nasdaq slumped 162.31 points or 1.2 percent to 13,722.02, the S&P 500 slid 31.67 points or 0.7 percent to 4,467.71 and the Dow fell 191.13 points or 0.5 percent at 35,123.36.

The lower close on Wall Street came as traders remained cautious ahead of the release the Labor Department report on consumer price inflation.

Computer hardware stocks saw substantial weakness on the day, contributing to the steep drop by the tech-heavy Nasdaq. Reflecting the weakness in the sector, the NYSE Arca Computer Hardware Index plunged by 4.4 percent.

Super Micro Computer (SMCI) led the way lower plummeting by 23.4 percent after reporting better than expected fiscal fourth quarter results but providing disappointing revenue guidance for fiscal 2024.

Significant weakness was also visible among airline stocks, as reflected by the 2.6 percent slump by the NYSE Arca Airline Index. The index fell to its lowest closing level in two months.

Semiconductor, financial and networking stocks also saw considerable weakness on the day, while energy stocks bucked the downtrend amid a sharp increase by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are slipping $0.29 to $84.11 a barrel after surging $1.48 to $84.40 a barrel on Wednesday. Meanwhile, after falling $9.30 to $1,950.60 an ounce in the previous session, gold futures are climbing $10.70 to $1,961.30 an ounce.

On the currency front, the U.S. dollar is trading at 143.91 yen versus the 143.73 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1018 compared to yesterday’s $1.0974.

Asia

Asian shares ended Thursday’s session on a mixed note as China deflation worries persisted and caution crept in ahead of U.S. consumer price inflation data due later in the day.

The dollar slipped in Asian trading, helping gold prices push higher. Oil edged up in choppy trade to hover near multi-month highs after data indicated robust fuel demand in the United States.

Chinese shares edged up slightly, with the Shanghai Composite Index inching up 0.3 percent to 3,254.56 on hopes that policymakers will unveil more stimulus measures to boost the recovery in the world’s second largest economy.

Hong Kong’s Hang Seng Index finished little changed at 19,248.26 after U.S. President Joe Biden on Wednesday signed an executive order that will prohibit some new U.S. investment in sensitive technologies in China.

Japanese shares rose sharply after Honda Motor and Inpex posted strong earnings. Honda shares surged 5.9 percent and Inpex soared 16.6 percent.

Entertainment conglomerate Sony tumbled 3.2 percent after reporting a 31 percent decrease in the April-June quarter operating profit.

The Nikkei 225 Index rallied 0.8 percent to 32,473.65 ahead of a holiday on Friday. The broader Topix settled 0.9 percent higher at 2,303.51.

Seoul stocks moved modestly lower, with the Kospi edging down 0.1 percent to 2,601.56. Market bellwether Samsung Electronics fell 1.3 percent and battery maker Samsung SDI declined 1.9 percent.

Australian markets eked out modest gains as higher oil prices lifted energy stocks. Miners also advanced, while tech stocks were among the biggest drags.

QBE Insurance fell 1.2 percent after its half-year profit missed estimates. The benchmark S&P ASX 200 Index rose 0.3 percent to 7,357.40, while the broader All Ordinaries Index ended 0.3 percent higher at 7,568.50.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index slipped 0.2 percent to 11,811.77.

Europe

European stocks are mostly higher on Thursday as traders react positively to the tamer-than-expected U.S. inflation data.

While the French CAC 40 Index has jumped by 1.1 percent, the German DAX Index is up by 0.5 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

Zurich Insurance has shown a notable move to the upside after the Swiss firm delivered strong results in the first six months of the year.

Germany’s Allianz has also moved higher after it posted a better-than-expected 18 percent increase in second-quarter net profit.

Industrial conglomerate Thyssenkrupp has also rallied after saying it is now targeting the upper end of its operating profit outlook range in 2023.

Housebuilder Persimmon has also moved sharply higher after it forecast an annual profit in line with expectations.

Mining giant Antofagasta has also moved higher after reporting decent first-half growth and raising shareholder payouts.

On the other hand, engineering group Siemens has plunged after missing profit forecasts in its latest quarter.

Denmark’s Novo Nordisk, which makes blockbuster drug Wegovy, has also fallen after extending supply restrictions for some doses of the weight-loss drug.

Hapag Lloyd has also moved notably lower. The container shipper posted a 67 percent decrease in first-half profit.

Biopharmaceutical group MorphoSys has also moved to the downside after it revealed a loss for the second quarter.

U.S. Economic Reports

A highly anticipated report released by the Labor Department on Thursday showed U.S. consumer prices increased in line with economist estimates in the month of July.

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

The report also said the annual rate of growth by consumer prices accelerated to 3.2 percent in July from 3.0 percent in June. Economists had expected the pace of price growth to accelerate to 3.3 percent.

Excluding food and energy prices, core consumer prices also rose by 0.2 percent for the second straight month in July, in line with estimates.

Meanwhile, the annual rate of growth by core consumer prices slowed to 4.7 percent in July from 4.8 percent in June. The rate of growth was expected to be unchanged.

The Labor Department also released a separate report showing first-time claims for U.S. unemployment benefits rose by much more than expected in the week ended August 5th.

The report said initial jobless claims climbed to 248,000, an increase of 21,000 from the previous week’s unrevised level of 227,000. Economists had expected jobless claims to inch up to 230,000.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $23 billion worth of thirty-year bonds.

Stocks In Focus

Shares of Capri (CPRI) are skyrocketing in pre-market trading after Coach and Kate Spade parent Tapestry (TPR) announced an agreement to acquire the Michael Kors parent for approximately $8.5 billion or $57 per share in cash.

Marketing platform AppLovin (APP) is also seeing substantial pre-market strength after reporting better than expected second quarter results and providing upbeat revenue guidance for the current quarter.

Meanwhile, shares of Illumina (ILMN) may come under pressure after the biotechnology reported second quarter results that exceeded expectations but cut its annual profit forecast.

Amusement park company Six Flags Entertainment (SIX) may also move to the downside after reporting second quarter earnings that missed analyst estimates.