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Looming Inflation Data May Lead To Choppy Early Trading On Wall Street
US Market
The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction after moving mostly higher over the course of the previous session.
Traders may be reluctant to make significant moves ahead of the release of the Federal Reserve’s preferred readings on consumer price inflation shortly after the start of trading.
The personal consumption expenditures (PCE) price index is expected to rise by 0.2 percent for the second straight month, while the annual rate of growth is expected to accelerate to 2.3 percent in October from 2.1 percent in September.
The core PCE price index, which excludes food and energy prices, is also expected to increase by 0.3 percent for the second straight month, while the annual rate of growth is expected to tick up to 2.8 percent in October from 2.7 percent in September.
The inflation data could impact the outlook for interest rates ahead of the Fed’s next monetary policy meeting in mid-December.
Ahead of the data, CME Group’s FedWatch Tool is indicating a 66.5 percent chance the Fed will lower rates by another 25 basis points next month and a 33.5 percent chance the central bank will leave rates unchanged.
The futures remained little changed even after the release of some key economic data before the start of trading, including a Labor Department report showing initial jobless claims unexpectedly edged lower in the week ended November 23rd.
The Commerce Department also released a report showing durable goods orders increased by less than expected in the month of October.
After turning in a mixed performance early in the session, the major U.S. stock indexes all moved to the upside over the course of the trading day on Tuesday. The Dow recovered from early weakness to end the day at another new record closing high.
The Dow fell by as much as 0.7 percent in early trading but ended the day up 123.74 points or 0.3 percent at 44,860.31. The S&P 500 also climbed 34.26 points or 0.6 percent to a record closing high of 6,021.63, while the Nasdaq rose 119.46 points or 0.6 percent to 19,174.30.
The higher close by the major averages came as traders shrugged off President-elect Donald Trump’s latest threats to impose increased tariffs on Mexico, Canada and China.
In a post on his social media platform Truth Social, Trump said he would impose a 25 percent tariff on all products from Mexico and Canada on his first day in office, blaming the countries for the influx of illegal immigrants and illicit drugs into the U.S.
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” Trump said.
Trump said in a subsequent post that he would also impose an additional 10 percent tariff on Chinese products, claiming the country has not done enough to stop the “massive amounts of drugs, in particular Fentanyl, being sent into the United States.”
With Trump recently announcing he intends to nominate Scott Bessent as Treasury Secretary, traders may be optimistic the former president will not following through on his threats. Bessent has previously called for Trump’s planned tariff increases to be implemented gradually.
Stocks saw further upside as the minutes of the Federal Reserve’s latest monetary policy meeting revealed officials believe it will be appropriate to “gradually” lower interest rates.
The minutes said officials feel a gradual approach to lowering rates to a more neutral stance will be appropriate if economic data come in “about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment.”
The Fed said participants also noted that monetary policy decisions were not on a “preset course and were conditional on the evolution of the economy and the implications for the economic outlook and the balance of risks.”
Software stocks turned in a strong performance on the day, driving the Dow Jones U.S. Software Index up by 1.4 percent to a record closing high.
Utilities and pharmaceutical stocks also saw considerable strength, with the Dow Jones Utility Average and the NYSE Arca Pharmaceutical Index climbing by 1.3 percent and 1.2 percent, respectively.
On the other hand, housing stocks moved significantly lower, dragging the Philadelphia Housing Sector Index down by 1.8 percent.
The weakness among housing stocks came after the Commerce Department released a report showing a substantial pullback by new home sales in the month of October.
Oil service, airline and computer hardware stocks also saw notable weakness, partly offsetting the strength in the aforementioned sectors.
U.S. Economic News
A report released by the Labor Department on Wednesday showed first-time claims for U.S. unemployment benefits unexpectedly edged lower in the week ended November 23rd.
The Labor Department said initial jobless claims dipped to 213,000, a decrease of 2,000 from the previous week’s revised level of 215,000.
Economists had expected jobless claims to rise to 217,000 from the 213,000 originally reported for the previous week.
The report said the less volatile four-week moving average also slipped to 217,000, a decrease of 1,250 from the previous week’s revised average of 218,250.
The Commerce Department also released a report on Wednesday showing new orders for U.S. manufactured durable goods increased by less than expected in the month of October.
The report said durable goods orders rose by 0.2 in October after falling by a revised 0.4 percent in September.
Economists had expected durable goods orders to climb by 0.5 percent compared to the 0.7 percent decrease that had been reported for the previous month.
Excluding orders for transportation equipment, durable goods orders inched up by 0.1 in October after rising by 0.4 percent in September. Ex-transportation orders were expected to edge up by 0.2 percent.
Meanwhile, the jump by U.S. economic activity in the third quarter was unrevised compared to the previous estimate, according to another report released by the Commerce Department on Wednesday.
The Commerce Department said gross domestic product surged by 2.8 percent in the third quarter, unchanged versus the “advance” estimate issued last month.
The report said upward revisions to private inventory investment and nonresidential fixed investment were offset by downward revisions to exports and consumer spending.
The unrevised increase by GDP in the third quarter still reflects a modest slowdown from the 3.0 percent jump in the second quarter.
At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of November. The Chicago business barometer is expected to climb to 44.7 in November from 41.6 in October, but a reading below 50 would still indicate contraction.
The Commerce Department is due to release its report on personal income and spending in the month of October at 10 am ET. Personal income and spending are both expected to increase by 0.3 percent.
The personal consumption expenditures (PCE) price index is expected to rise by 0.2 percent for the second straight month, while the annual rate of growth is expected to accelerate to 2.3 percent in October from 2.1 percent in September.
The core PCE price index, which excludes food and energy prices, is also expected to increase by 0.3 percent for the second straight month, while the annual rate of growth is expected to tick up to 2.8 percent in October from 2.7 percent in September.
Also at 10 am ET, the National Association of Realtors is due to release its report on pending home sales in the month of October. Pending home sales are expected to slump by 1.3 percent in October after spiking by 7.4 percent in September.
The Energy Information Administration is scheduled to release its report on oil inventories in the week ended November 22nd at 10:30 am ET. Crude oil inventories are expected to decrease by 1.3 million barrels after rising by 0.5 million barrels in the previous week.
At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $44 billion worth of seven-year notes.
Stocks in Focus
Shares of Dell Technologies (NYSE:DELL) are moving sharply lower in pre-market trading after the PC maker reported fiscal third quarter earnings that exceeded estimates but provided disappointing fiscal fourth quarter guidance.
Human resources software company Workday (NASDAQ:WDAY) may also come under pressure after reporting better than expected fiscal third quarter results but forecasting fiscal fourth quarter subscription revenue below analyst estimates.
Meanwhile, shares of Urban Outfitters (NASDAQ:URBN) are likely to see initial strength after the retailer reported fiscal third quarter results that exceeded expectations on both the top and bottom lines.
Europe
European stocks have moved mostly lower on Wednesday, as investors fret about potential inflationary pressures arising from U.S. President-elect Donald Trump’s proposed tariff policies.
Investors worry Trump’s economic plans, particularly tax cuts and tariffs, could have a substantial impact on the Federal Reserve’s plans to lower interest rates.
Sentiment was also dented as the risk premium investors demand to hold French debt rose to its highest level since 2012 amid fiscal and political turbulence and angst over the fate of the new government.
While the French CAC 40 Index has slumped by 0.9 percent, the German DAX Index is down by 0.3 percent and the U.K.’s FTSE 100 Index is down by 0.1 percent.
Just Eat Takeaway.com NV shares have moved lower after the food delivery company revealed plans to delist from the London Stock Exchange on December 27, citing low trading volumes and high costs, while retaining its primary listing on Euronext Amsterdam.
Grifols has plummeted after reports that Canadian fund Brookfield is planning to drop its plan to take over the Spanish pharmaceutical firm.
Johnson Matthey, a British chemicals and specialist technologies firm, has also slumped after posting a drop in sales and profits in the six months to September end.
Meanwhile, EasyJet has rallied as the airline reported an increase in annual profits following a second record-breaking summer.
Aroundtown SA, a Luxembourg-based real estate company, has also surged after posting strong operational results for the first nine months of 2024.
Swiss biotech firm Idorsia has also moved sharply higher after it unveiled plans to restructure its debt and shed up to 270 jobs.
On a light day on the economic front, new data showed consumers in France were more pessimistic about the future general economic situation in the country.
French consumer confidence worsened further in November to the lowest level in five months, monthly survey data from the statistical office INSEE showed today.
The consumer sentiment index dropped to 90 in November from 93 in the previous month. Further, the index remained well below its long-term average of 100.
Asia
Asian stocks turned in a mixed performance on Wednesday as official data showed Chinese industrial profits fell again in October but less sharply than in September.
Regional gains were limited by tariff worries as U.S. President-elect Donald Trump picked another China critic, Jamieson Greer, to serve as the United States Trade Representative (USTR) and appointed Kevin A Hassett as the director of the White House National Economic Council, key figures in implanting the new administration’s economic agenda.
Jamieson played a key role during Trump’s first term in imposing tariffs on China and others to combat unfair trade practices and replacing the failed NAFTA deal with USMCA. Hassett played a crucial role in helping design and pass the Tax Cuts and Jobs Act of 2017.
The dollar was muted in Asian trading amid anxiety about Trump’s plans and ahead of the release of U.S. October Core Personal Consumption Expenditures Price Index data later in the day.
Oil and gold prices traded higher as investors assessed the potential impact of a ceasefire deal between Israel and Hezbollah.
China’s Shanghai Composite Index rallied 1.5 percent to 3,309.78 after data showed industrial profit decline eased to 10 percent year-on-year in October from 27.1 percent in the previous month.
Hong Kong’s Hang Seng Index jumped 2.3 percent to 19,603.13, rebounding from a two-month low.
Japanese markets retreated as a stronger yen weighed on automotive stocks such as Honda Motor, Toyota and Nissan, which fell 3-5 percent. Traders also fretted about the impact of U.S. President-elect Donald Trump’s tariff pledges.
The Nikkei 225 Index fell 0.8 percent to close at 38,134.97 and the broader Topix Index finished 0.9 percent lower at 2,665.34.
Seoul stocks ended lower, with the Kospi closing down 0.7 percent at 2,503.06. Chip-related stocks declined, with Samsung Electronics tumbling 3.4 percent and SK Hynix plunging 5 percent due to elevated uncertainty surrounding the U.S. CHIPS Act.
Australian markets advanced after data showed consumer price inflation in the country stayed at a three-year low in October, prompting analysts to predict a possible 25 basis point cut by May 2025.
The benchmark S&P/ASX 200 Index climbed 0.6 percent to 8,406.70, while the broader All Ordinaries Index settled 0.6 percent higher at 8,659.60.
Online travel company Web Travel Group surged 13.5 percent after unveiling its half-year results. Among financials, Commonwealth Bank of Australia and QBE Insurance both rose over 2 percent.
Across the Tasman, New Zeeland’s benchmark S&P/NZX-50 Index advanced 0.8 percent to 13,212.92 as the country’s central bank slashed its interest rate by 50 basis points, marking a third straight cut to its benchmark rate, and flagged more substantial easing to boost its struggling economy.
Commodities
Crude oil futures are rising $0.31 to $69.08 a barrel after slipping $0.17 to $68.77 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,676.30, up $30 compared to the previous session’s close of $2,646.30. On Tuesday, gold inched up $3.70.
On the currency front, the U.S. dollar is trading at 151.35 yen compared to the 153.08 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0549 compared to yesterday’s $1.0489.
