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Futures Turn Positive Following Highly Anticipated Inflation Data

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February 29 2024 4:00AM

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 modestly lower.

The futures turned positive following the release of a highly anticipated Commerce Department showing consumer prices in the U.S. increased in line with economist estimates in the month of January.

The Commerce Department said consumer prices rose by 0.3 percent in January after inching up by a revised 0.1 percent in December.

Economists had expected consumer prices to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.

Excluding food and energy prices, core consumer prices climbed by 0.4 percent in January after edging up by a revised 0.1 percent in December. The increase in core prices also matched estimates.

Meanwhile, the report said the annual rate of consumer price growth slowed to 2.4 percent in January from 2.6 percent in December. The slowdown matched expectations.

The annual rate of core consumer price growth also slowed to 2.8 percent in January from 2.9 percent in December, in line with estimates.

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending in the month of January.

The slowdown in consumer price growth may generate optimism about the outlook for interest rates, as Fed officials have said they need greater confidence is slowing before they consider cutting rates.

A separate report released by the Labor Department showing first-time claims for U.S. unemployment benefits rose by more than expected in the week ended February 24th may also lead to interest rate optimism.

Stocks regained ground after an early move to the downside on Wednesday but still ended the day mostly lower. The major averages all finished the day in negative territory following the mixed performance on Tuesday, with the Dow closing lower for the third consecutive session.

After falling by more than 200 points in early trading, the Dow ended the day down just 23.39 points or 0.1 percent at 38,949.02. The S&P 500 dipped 8.42 points or 0.2 percent to 5,069.76, while the Nasdaq slid 87.56 points or 0.6 percent at 15,947.74.

The early weakness on Wall Street came as some traders looked to cash in on the recent strength in the markets ahead of the release of closely watched readings on consumer price inflation on Thursday.

Selling pressure waned shortly after the start of trading, however, with the subsequent recovery attempt potentially reflecting a positive reaction to revised data showing the U.S. economy grew by slightly less than previously estimated in the fourth quarter of 2023.

The Commerce Department said the jump by real gross domestic product in the fourth quarter was downwardly revised to 3.2 percent from the previously reported 3.3 percent. Economists had expected the surge in GDP to be unrevised.

“It is only in the topsy-turvy world of Wall Street where bad news can be good news (e.g. lower economic growth is good) because of the interplay between the economy, markets and the Federal Reserve,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

He added, “In a market environment where people are worried about a Fed keeping rates higher for longer, any drop in economic activity (or inflation) can be seen as another reason why the Fed can cut rates sooner.”

Gold stocks turned in some of the market’s worst performances on the day, dragging the NYSE Arca Gold Bugs Index down by 1.5 percent. The weakness among gold stocks came amid a modest decrease by the price of the precious metal.

Notable weakness was also visible among semiconductor stocks, as reflected by the 1.1 percent loss posted by the Philadelphia Semiconductor Index.

Steel, airline and networking stocks also moved to the downside on the day, while considerable strength emerged among commercial real estate stocks.