U.S. Stocks May See Initial Strength On Tamer-Than-Expected Inflation Data

After ending the previous session off their worst levels but still mostly lower, stocks are likely to move to the upside in early trading on Wednesday. The major index futures are currently pointing to a sharply higher open for the markets, with the S&P 500 futures up by 1.3 percent.

The futures advanced following the release of a closely watched Labor Department report showing consumer prices in the U.S. increased by slightly less than expected in the month of February.

The Labor Department said its consumer price index crept up by 0.2 percent in February after climbing by 0.5 percent in January. Economists had expected consumer prices to rise by 0.3 percent.

Excluding food and energy prices, the core consumer price index also rose by 0.2 percent in February following a 0.4 percent increase in January. Core prices were also expected to climb by 0.3 percent.

The report also said the annual rate of consumer price growth slowed to 2.8 percent in February from 3.0 percent in January. Economists had expected the pace of price growth to edge down to 2.9 percent.

The annual rate of core consumer price growth also slowed to 3.1 percent in February from 3.3 percent in January. Core price growth was expected to dip to 3.2 percent.

The tamer-than-expected inflation may lead to optimism about the Federal Reserve resuming interest rate cuts in the near future.

Positive sentiment may also be generated in reaction to news Ukraine has agreed to a U.S. proposal for an “immediate, interim 30-day ceasefire” with Russia

However, traders may be somewhat reluctant to get back into the markets amid lingering concerns about the impact of new trade policies.

With new U.S. steel and aluminum imports taking effect today, the European Union said it would impose counter tariffs on 26 billion euros ($28 billion) worth of U.S. goods beginning next month.

U.S. stocks closed on a negative note on Tuesday after a highly volatile session. The major averages all closed in the red despite a recovery attempt past mid afternoon. Worries about the global economic outlook and fears of a possible recession in the U.S. due to the trade war hurt investor sentiment.

The Dow settled lower by 478.23 points or 1.1 percent at 41,433.48 after hitting a low of 41,175.37 and a high of 41,868.27 in the session.

The S&P 500 ended down 42.49 points or 0.8 percent, at 5,572.07, while the Nasdaq settled lower by 32.23 points or 0.2 percent, at 17,436.10. The Nasdaq climbed to 17,687.40 in the final hour, rallying from a low of 17,238.24.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Wednesday. China’s Shanghai Composite Index dipped by 0.2 percent and Hong Kong’s Hang Seng Index slid by 0.8 percent, although Japan’s Nikkei 225 Index bucked the downtrend and inched up by 0.1 percent.

Meanwhile, the major European markets have moved to the upside on the day. While the German DAX Index is up by 1.6 percent, the French CAC 40 Index is up by 1.3 percent and the U.K.’s FTSE 100 Index is up by 0.6 percent.

In commodities trading, crude oil futures are climbing $0.85 to $67.10 a barrel after rising $0.22 to $66.25 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,918.90, down $2 compared to the previous session’s close of $2,920.90. On Tuesday, gold jumped $21.50.

On the currency front, the U.S. dollar is trading at 148.87 yen compared to the 147.78 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0886 compared to yesterday’s $1.0919.

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