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S&P 500, Dow Futures Dip As Investors Brace For Key Inflation Data: Expert Says 'Strong Productivity' Will Cap Inflation Despite Fed's Rate Cuts
Source: Buzz FX / 13 Nov 2024 05:36:23 America/Chicago
U.S. stocks could open on a negative note on Wednesday after the averages scaled record highs last week. Futures of all three major indices were slightly down as investors await the crucial Consumer Price Index (CPI) print scheduled to be released on Wednesday.
Nasdaq, S&P 500, and Dow Jones surged over 4% last week after the GOP sweep and the Federal Reserve delivered a widely expected 25 basis point rate cut.
However, after Dow Jones scaled a record 44,000 to kick off the week on a positive note, the markets have witnessed a slight pullback due to profit booking and caution among investors.
Futures Change (+/-) Nasdaq 100 -0.14% S&P 500 -0.13% Dow Jones -0.11% R2K -0.08% In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) fell 0.11% to $596.25 and the Invesco QQQ ETF (NASDAQ:QQQ) declined 0.12% to $512.30, according to Benzinga Pro data.
Cues From Last Session:
The S&P 500 and Nasdaq both snapped their five-session winning streak on Tuesday, edging lower as investors took a breather.
Crude oil prices remained under the $70 mark but edged up due to near-term supply tightness.
Treasury yields eased a little as investors await inflation data.
On the economic data front, U.S. consumer inflation expectations for the year ahead eased to 2.9% in October compared to 3% in each of the prior four months.
The RealClearMarkets/TIPP Economic Optimism Index rose 13.4% in November to a reading of 53.2, recording the highest reading in over three years.
Most sectors on the S&P 500 closed on a negative note, with materials, health care, and real estate stocks recording the biggest losses on Tuesday.
However, information technology and communication services stocks bucked the overall market trend, closing the session higher.
Index Performance (+/-) Value Nasdaq Composite -0.09% 19,281.40 S&P 500 -0.29% 5,983.99 Dow Jones -0.86% 43,910.98 Russell 2000 -1.77% 2,391.85 Insights From Analysts:
Ryan Detrick, chief market strategist at Carson Group, thinks that the Fed has enough room to cut interest rates further without worrying about a surge in inflation. According to him, the "strong productivity" will help keep inflation capped.
"As long as productivity remains strong (like we think it should) the path is there for the Fed to continue to cut interest rates and not worry about inflation soaring back."
However, analysts at BlackRock Investment Institute expressed caution on inflation.
"We focus on U.S. CPI to see if inflation will keep falling toward the Fed's 2% target. Short-term inflation has been decreasing, with immigration boosting the labor supply and cooling wage growth. However, recent services PCE data remains sticky, indicating that inflation may settle above 2% in the medium term."
Over the longer term, though, an aging population could maintain a persistent upward pressure on inflation, the firm said.
Wells Fargo's lead economist Jay Bryson echoed similar sentiments, saying, "The October CPI report will likely support the notion that the last mile of inflation’s journey back to target will be the hardest."
WisdomTree and Wharton School economist Jeremy Siegel continued to stress that the equity markets have enough gas in them to continue the ongoing bull run.
"The ‘bull market' sentiment remains intact, though valuations remain a watch point," he said, adding that the expectations of "lighter regulations" from President-elect Donald Trump's administration would benefit equities.
"The bull market in stocks looks set to continue, while bonds face a rougher road," Siegel said but noted that the gains that equity investors have been seeing this year are unlikely to repeat in 2025.
See Also: How To Trade Futures
Upcoming Economic Data
Wednesday's economic calendar includes the release of inflation print.
- The Consumer Price Index (CPI) will be released at 8:30 a.m. ET.
- New York Fed President John Williams will speak at 9:30 a.m. ET.
- Dallas Fed President Lorie Logan will speak at 9:45 a.m. ET.
- The monthly U.S. federal budget will be released at 2 p.m. ET.
Stocks In Focus:
- Rivian Automotive Inc. (NASDAQ:RIVN) shares surged nearly 13% in premarket trading on Wednesday after the company announced the launch of its joint venture with the Volkswagen Group (OTC:VWAGY), with the deal value rising from $5 billion to $5.8 billion.
- Tesla Inc. (NASDAQ:TSLA) shares rose over 2.5% in premarket trading on Wednesday, after CEO Elon Musk was appointed to the Department of Government Efficiency, or DOGE, along with Vivek Ramaswamy.
- Spirit Airlines Inc. (NYSE:SAVE) stock fell over 65% in premarket trading after the company inched closer to bankruptcy and failed to file its September quarter earnings.
- MicroStrategy Inc. (NASDAQ:MSTR) and Robinhood Markets Inc. (NASDAQ:HOOD) shares continued to surge after Bitcoin (CRYPTO: BTC) inched closer to $90,000.
- Investors are awaiting earnings results from CyberArk Software Ltd. (NASDAQ:CYBR), Cisco Systems, Inc. (NASDAQ:CSCO), and Beazer Homes USA, Inc. (NYSE:BZH) today.
Commodities, Bonds And Global Equity Markets:
Crude oil futures surged in the early New York session, rising by 0.81% to hover around $68.67 per barrel.
The 10-year Treasury note yield eased slightly to 4.418%.
Most of the major Asian markets ended in the red on Wednesday, but European markets were in the green in early trading.
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Photo courtesy: Wikimedia
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