U.S. Stocks May See Initial Strength On Relatively Tame Inflation Reading

Following three straight mixed performances, stocks may move to the upside in early trading on Wednesday. The major index futures are currently pointing to a higher open for the markets, with the Dow futures up by 67 points.

The futures saw a positive reaction to the Labor Department’s highly anticipated consumer price inflation report, which showed consumer prices increased in line with economist estimates.

The Labor Department said its consumer price index climbed by 0.5 percent in July after jumping by 0.9 percent in June.

Economists had expected consumer prices to rise by 0.5 percent following the advance in the previous month, which reflected the biggest increase since June of 2008.

Compared to the same month a year ago, consumer prices in July were up by 5.4 percent, unchanged from the annual rate of growth seen in June. The pace of growth was expected to dip to 5.3 percent.

Excluding higher food and energy prices, core consumer prices rose by 0.3 percent in July after surging by 0.9 percent in June. Economists had expected core prices to increase by 0.4 percent.

The annual rate of growth in core prices slowed to 4.3 percent in July from 4.5 percent in June, matching economist estimates.

While the pace of core consumer price growth remains well above the Federal Reserve’s 2 percent target, traders may see the modest slowdown as a sign the central bank will not be in a hurry to scale back stimulus.

The Fed’s asset purchase program has helped prop up the markets throughout much of the coronavirus pandemic, making traders wary of any signs of potential tapering.

The recent resurgence in coronavirus cases may weigh on the economy, leading the Fed to put off tapering plans and allowing stocks to continue to climb to record highs.

After closing on opposite sides of the unchanged line for two straight sessions, the major U.S. stock indexes turned in another mixed performance during trading on Tuesday. While the Dow and the S&P 500 reached new record highs, the tech-heavy Nasdaq moved to the downside.

The Dow moved higher early in the session and remained firmly positive throughout the day before closing up 162.82 points or 0.5 percent to 35,264.67. The S&P 500 fluctuated over the course of the session but managed to inch up 4.40 points or 0.1 percent to 4,436.75.

Meanwhile, the Nasdaq came under pressure after seeing initial strength and ended the day down 72.09 points or 0.5 percent at 14,788.09.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index climbed by 0.7 percent, while China’s Shanghai Composite Index inched up by 0.1 percent.

The major European markets have also moved to the upside on the day. While the German DAX Index is just above the unchanged line, the French CAC 40 Index is up by 0.4 percent and the U.K.’s FTSE 100 Index is up by 0.5 percent.

In commodities trading, crude oil futures are falling $0.58 to $67.71 a barrel after jumping $1.81 to $68.29 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,746.70, up $15 compared to the previous session’s close of $1,731.70. On Tuesday, gold rose $5.20.

On the currency front, the U.S. dollar is trading at 110.53 yen compared to the 110.57 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1727 compared to yesterday’s $1.1720.

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