Inflation Data In Line With Estimates May Lead To Rebound On Wall Street

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

The futures advanced following the release of closely watched consumer price inflation data that came in line with economist estimates.

The Labor Department said its consumer price index climbed by 0.3 percent in November after rising by 0.2 percent for four straight months. The increase matched expectations.

The annual rate of growth by consumer prices ticked up to 2.7 percent in November from 2.6 percent in October, which was also in line with estimates.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in November, matching the increases seen in each of the three previous months as well as expectations.

The Labor Department also said core consumer prices in November jumped by 3.3 percent compared to the same month a year ago, unchanged from October and in line with estimates.

With the data matching expectations, the report is likely to increase confidence the Federal Reserve will lower interest rates by another quarter point next week.

CME Group’s FedWatch Tool is currently indicating a 96.7 percent chance the Fed will cut rates by 25 basis points at its December meeting.

However, the FedWatch Tool also indicates a 76.7 percent chance the central bank will then leave rates unchanged at its next meeting in late January.

After failing to sustain an early move to the upside, stocks moved moderately lower over the course of the trading session on Tuesday. The major averages added to the losses posted during Monday’s session, with the Nasdaq and the S&P 500 pulling back further off last Friday’s record closing highs.

The major averages dipped to new lows for the session in the latter part of the trading day. The Dow slid 154.10 points or 0.4 percent to 44,247.83, the Nasdaq fell 49.45 points or 0.3 percent to 19,687.24 and the S&P 500 slipped 17.94 points or 0.3 percent to 6,034.91.

The weakness that emerged on Wall Street came as traders continued to cash in on recent strength in the markets ahead of the release of the Labor Department’s closely watched report on consumer price inflation on Wednesday.

“There’s been little sign of the hoped-for ‘Santa rally’ across markets today as Wall Street continues to be distracted ahead of tomorrow’s inflation data,” said Danni Hewson, head of financial analysis at AJ Bell.

Computer hardware stocks moved sharply lower on the day, with the NYSE Arca Computer Hardware Index plunging by 3.8 percent after ending Monday’s trading at a nearly five-month closing high.

Significant weakness was also visible among semiconductor stocks, as reflected by the 2.5 percent slump by the Philadelphia Semiconductor Index.

Housing stocks also saw considerable weakness on the day, dragging the Philadelphia Housing Sector Index down by 2.1 percent.

Homebuilder Toll Brothers (TOL) led the sector lower after reporting fiscal fourth quarter earnings and revenues that beat estimates but weaker than expected unadjusted homebuilding gross margin.

On the other hand airline stocks showed a strong move to the upside, driving the NYSE Arca Airline Index up by 1.7 percent. Alaska Air Group (ALK) soared by 13.2 percent after raising its fourth quarter profit forecast.

Commodity, Currency Markets

Crude oil futures are climbing $0.85 to $69.44 a barrel after rising $0.22 to $68.59 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,725.50, up $7.10 compared to the previous session’s close of $2,718.40. On Tuesday, gold surged $32.60.

On the currency front, the U.S. dollar is trading at 152.25 yen compared to the 151.95 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0516 compared to yesterday’s $1.0527.

Asia

Asian stocks turned in a mixed performance on Wednesday as traders awaited key U.S. inflation data due later in the day that could influence the Federal Reserve’s interest rate decision next week. Currently, markets are pricing in an 85 percent chance of a quarter-point cut.

Investors also braced for China’s two-day Central Economic Work Conference that is expected to map out policies for next year.

The Japanese yen recovered from a recent slump against the U.S. dollar after data showed inflation in Japan’s corporate goods prices accelerated to the fastest pace in 16 months, keeping the Bank of Japan under pressure to raise interest rates again.

Gold steadied near a two-week high in Asian trading and oil prices ticked higher amid heightened geopolitical tensions.

China’s Shanghai Composite Index rose 0.3 percent to 3,432.49 after President Xi Jinping said on Tuesday that Beijing is fully confident in achieving its economic growth target this year.

Hong Kong’s Hang Seng Index fell 0.8 percent to 20,155.05, giving up initial gains as Chinese leaders convened an annual planning meeting in Beijing to set economic policies and growth targets for the coming year.

Japanese markets ended on a flat note amid uncertainty over how soon the Bank of Japan could raise interest rates.

The Nikkei 225 Index finished marginally higher at 39,372.23, heading into the Bank of Japan policy meeting next week. The broader Topix Index settled 0.3 percent higher at 2,749.31.

Nippon Steel Corp. rose 0.6 percent after reports that the Biden administration would block its planned takeover of U.S. Steel on national security grounds.

Seoul stocks rose for a second straight session after data showed the country added more than 120,000 jobs in November, a slight uptick from the previous month.

The Kospi rallied 1.0 percent to 2,442.51, with shipbuilders, financials, defense equipment and internet-related shares leading the surge.

Australian markets ended lower ahead of domestic jobs data, scheduled for Thursday. The benchmark S&P/ASX 200 Index dropped 0.5 percent to 8,353.60, marking the lowest close since November 26. The broader All Ordinaries Index closed 0.5 percent lower at 8,610.40.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index ended the session up 0.3 percent at 12,761.19, snapping a three-session losing streak.

Europe

After having snapped an eight-session losing streak the previous day, European stocks are seeing further upside during trading on Wednesday as traders digest the U.S. inflation data.

Market participants also await the ECB policy meeting and the outcome of China’s two-day Central Economic Work Conference that is expected to map out policies for next year.

While the German DAX Index is up by 0.1 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both up by 0.4 percent.

Zara owner Inditex has shown a significant move to the downside after reporting disappointing third-quarter sales.

German energy group Siemens Energy has also declined after U.S. rival GE Vernova sounded cautious about the outlook for the struggling wind sector.

Sportswear maker Adidas has also dipped after authorities raided its headquarters in Germany as part of a prolonged tax investigation.

Online retailer Zalando has also plunged after it struck a deal to buy rival fashion group About You Holding for 1.1 billion euros. Shares of the latter have soared.

TUI Group, a leisure and travel company, has plummeted despite reporting a boost in profit in the 2024 financial year and projecting further growth into 2025.

RM Plc shares have jumped in London. The provider of educational technology and assessment solutions said its anticipated results for the fiscal year ended November 30, 2024, are likely to exceed market expectations.

Technology group Cohort has also rallied after reporting a record performance for the first half of the year.

British American Tobacco, a cigarette and tobacco manufacturer, has also risen after reaffirming its 2024 guidance.

U.S. Economic News

The Labor Department released a closely watched report on Wednesday showing consumer prices in the U.S. rose in line with economist estimates in the month of November.

The report said the consumer price index climbed by 0.3 percent in November after rising by 0.2 percent for four straight months. The increase matched expectations.

The annual rate of growth by consumer prices ticked up to 2.7 percent in November from 2.6 percent in October, which was also in line with estimates.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in November, matching the increases seen in each of the three previous months as well as expectations.

The Labor Department said core consumer prices in November jumped by 3.3 percent compared to the same month a year ago, unchanged from October and in line with estimates.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended December 6th. Crude oil inventories are expected to decrease by 1.3 million barrels after tumbling by 5.1 million barrels in the previous week.

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