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Hotter-Than-Expected Inflation Data May Trigger Sell-Off On Wall Street
US Market
The major U.S. index futures are currently pointing to a sharply lower open on Wednesday, with stocks likely to come under pressure amid a negative reaction to a highly anticipated report on consumer price inflation.
The futures plunged following the release of a Labor Department report showing U.S. consumer prices advanced by slightly more than expected in the month of March.
The Labor Department said consumer prices climbed by 0.4 percent in March, matching the increase seen in February. Economists had expected consumer prices to rise by 0.3 percent.
Excluding prices for food and energy, core consumer prices still rose by 0.4 percent for the third consecutive month. Core consumer prices were also expected to increase by 0.3 percent.
The report also said the annual rate of consumer price growth accelerated to 3.5 percent in March from 3.2 percent in February. Economists had expected a more modest acceleration to 3.4 percent.
Meanwhile, the annual rate of core consumer price growth came in at 3.8 percent in March, unchanged from February. Core price growth was expected to slow to 3.7 percent.
The data is likely to add to recent worries the Federal Reserve will hold off on lowering interest rates amid ongoing inflation concerns.
Fed officials have repeatedly said they need greater confidence inflation is slowing before they consider cutting rates.
Treasury yields have surged in reaction to the report, with the yield on the benchmark ten-year note jumping to its highest levels in almost six months.
Later in the day, the Fed is due to release the minutes of its latest monetary policy meeting, which may shed additional light on the outlook for interest rates.
Following the lackluster performance seen on Monday, stocks saw considerable volatility over the course of the trading session on Tuesday. The major averages fluctuated as the day progressed, with the Nasdaq and the S&P 500 eventually closing in positive territory.
While the Nasdaq rose 52.68 points or 0.3 percent to 16,306.64 and the S&P 500 inched up 7.52 points or 0.1 percent to 5,209.91, the narrower Dow ended the day slightly lower, edging down 9.13 points or less than a tenth of a percent to 38,883.67.
The volatility on Wall Street came as traders continued to look ahead to the release of the Labor Department’s report on consumer price inflation.
“The signs are clear for investors to see, but many have been choosing to ignore them,” he added. “The Fed putting it into black and white could be a difficult pill for investors to swallow, so brace yourself for turbulence on the market this week.”
Gold stocks showed a significant rebound following the pullback seen on Monday, driving the NYSE Arca Gold Bugs Index up by 1.9 percent to a nearly eleven-month closing high.
The strength among gold stocks came amid an increase by the price of the precious metal, which climbed to a new record high.
Considerable strength also emerged among biotechnology stocks, as reflected by the 1.6 percent gain posted by the NYSE Arca Biotechnology Index.
Networking, commercial real estate and telecom stocks also showed notable moves to the upside, while energy stocks saw some weakness amid a steep drop by the price of crude oil.
U.S. Economic Reports
Largely reflecting continued growth in prices for shelter and gasoline, the Labor Department released a report on Wednesday showing U.S. consumer prices advanced by slightly more than expected in the month of March.
The Labor Department said consumer prices climbed by 0.4 percent in March, matching the increase seen in February. Economists had expected consumer prices to rise by 0.3 percent.
Excluding prices for food and energy, core consumer prices still rose by 0.4 percent for the third consecutive month. Core consumer prices were also expected to increase by 0.3 percent.
The report also said the annual rate of consumer price growth accelerated to 3.5 percent in March from 3.2 percent in February. Economists had expected a more modest acceleration to 3.4 percent.
Meanwhile, the annual rate of core consumer price growth came in at 3.8 percent in March, unchanged from February. Core price growth was expected to slow to 3.7 percent.
At 10 am ET, the Commerce Department is scheduled to release its report on wholesale inventories in the month of February. Wholesale inventories are expected to increase by 0.5 percent.
The Energy Information Administration is due to release its report on oil inventories in the week ended April 5th at 10:30 am ET.
Crude oil inventories are expected to decrease by 2.4 million barrels after jumping by 3.2 million barrels in the previous week.
At 12:45 pm ET, Chicago Federal Reserve Bank President Austan Goolsbee is scheduled to participate in a panel before the Social Finance Institute.
The Treasury Department is due to announce the results of this month’s auction of $39 billion worth of ten-year notes at 1 pm ET.
At 2 pm ET, the Federal Reserve is scheduled to release the minutes of its monetary policy meeting held March 19-20.
Stocks in Focus
Shares of Delta Air Lines (DAL) are seeing notable pre-market strength after the airline reported better than expected fiscal first quarter earnings.
Telemedicine company GoodRx (GDRX) may also move to the upside after KeyBanc upgraded its rating on the company’s stock to Overweight from Sector Weight.
On the other hand, shares of Deckers Outdoor (DECK) may come under pressure after Truist downgraded its rating on the footwear company’s stock to Hold from Buy.
Europe
Following the release of the U.S. consumer price inflation data, European stocks have turned mixed on Wednesday after moving notably higher earlier in the session.
Thursday’s European Central Bank meeting also remains in focus, although no change in monetary policy is expected.
While the U.K.’s FTSE 100 Index is up by 0.3 percent, the German DAX Index is down 0.1 percent and the French CAC 40 Index is down by 0.2 percent.
Tech stocks are trading higher following positive results from Taiwan semiconductor group TSMC, the world’s largest contract chipmaker.
Barry Callebaut AG, a Swiss chocolate and cocoa products maker, has also soared after posting higher first-half revenue and backing its annual outlook.
Roche has also risen after it received CE Mark approval for the VENTANA HER2 (4B5) Rabbit Monoclonal Primary Antibody RxDx.
Philips has also advanced after the Dutch conglomerate reached an agreement with the U.S. government on a consent decree primarily focusing on the Respironics business operations.
Tesco shares have also climbed in London. The supermarket group forecast a further increase in profit in its new financial year after posting an 11 percent jump in profit in 2023/24.
Meanwhile, beauty e-tail giant and e-commerce tech specialist THG has slumped after a revenue dip driven by “action to discontinue loss making categories.”
Asia
Asian stocks ended mixed on Wednesday as investors awaited U.S. consumer price inflation data and the minutes of the Federal Reserve’s March meeting to assess the speed and timing of interest rate cuts.
The dollar was little changed in Asian trading, while gold scaled another record high, buoyed by ongoing geopolitical tensions and renewed concerns over inflation. Oil prices saw modest gains after a two-day decline.
China’s Shanghai Composite Index fell 0.7 percent to 3,027.34 after a downgrade of China’s sovereign credit rating to negative by Fitch. The focus was also on Chinese inflation data due on Thursday.
Hong Kong’s Hang Seng Index jumped 1.9 percent to 17,139.17, with technology stocks leading the surge.
E-commerce giant Alibaba Group Holding soared 5.1 percent after co-founder Jack Ma penned a lengthy memo to employees endorsing the internet giant’s restructuring efforts. Peers Baidu and Tencent rose 1.9 percent and 3.2 percent, respectively.
Japanese stocks declined after Bank of Japan Governor Kazuo Ueda ruled out responding to a weakening yen with a rate hike.
Meanwhile, data released earlier today showed Japanese producer price inflation grew slightly less than expected in March.
The Nikkei 225 Index dropped 0.5 percent to 39,581.81, while the broader Topix Index settled 0.4 percent lower at 2,742.79.
Seven & i Holdings fell 1.6 percent after reports the retail giant is considering an initial public offering for its supermarket business.
South Korean financial markets were closed for parliamentary elections.
Australian markets eked out modest gains as higher commodity prices on signs of an improvement in global manufacturing activity boosted heavyweight mining stocks.
The benchmark S&P ASX 200 Index rose 0.3 percent to 7,848.50, extending gains for a third straight session. The broader All Ordinaries Index ended up 0.4 percent at 8,109.70.
Across the Tasman, New Zealand’s benchmark S&P NZX-50 index rose 0.5 percent to 11,971.92 after the country’s central bank left its official cash rate unchanged for the sixth consecutive time and gave no hints that interest rate cuts are coming.
Commodities
Crude oil futures are rising $0.37 to $85.60 a barrel after tumbling $1.20 to $85.23 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,350.40, down $12 compared to the previous session’s close of $2,362.40. On Tuesday, gold climbed $11.40.
On the currency front, the U.S. dollar is trading at 152.32 yen compared to the 151.76 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0786 compared to yesterday’s $1.0857.
