Looming Inflation Data May Lead To Choppy Trading On Wall Street

The major U.S. index futures are currently pointing to a roughly flat open on Tuesday, with stocks likely to show a lack of direction after ending the previous session moderately higher.

Traders may remain reluctant to make more significant moves ahead of the release of closely watched inflation data in the coming days.

The Labor Department is scheduled to release reports on producer price inflation and consumer price inflation on Wednesday and Thursday, respectively.

While last Friday’s weaker-than-expected jobs data increased confidence the Fed will cut interest rates at its meeting next week, the inflation data could influence how aggressively the central bank lowers rates.

Economists currently expect the annual rate of producer price growth in August to come in unchanged from July at 3.3 percent.

The annual rate of growth by consumer prices is expected to accelerate to 2.9 percent in August from 2.7 percent in July, while the annual rate of growth by core consumer prices, which exclude food and energy prices, is expected to hold at 3.1 percent.

Ahead of the data, CME Group’s FedWatch Tool is currently indicating a 92.1 percent chance the Fed will lower rates by a quarter point and a slim 7.9 percent chance of a half-point rate cut.

Stocks moved moderately higher during trading on Monday, regaining ground after ending last Friday’s session well off their worst levels but still mostly lower. With the upward move, the tech-heavy Nasdaq reached a new record closing high.

The major averages all ended the day in positive territory. The Nasdaq climbed 98.31 points or 0.5 percent to 21,978.70, the Dow increased 114.09 points or 0.3 percent to 45,514.95 and the S&P 500 rose 13.65 points or 0.2 percent to 6,495.15.

The strength on Wall Street partly reflected optimism about the outlook for interest rates following last Friday’s weaker-than-expected U.S. employment data.

Following the release of a closely watched report showing employment increased by much less than expected in the month of August, the Federal Reserve is widely expected to lower rates later this month.

Trading activity was somewhat subdued, however, as traders looked ahead to the release of the inflation data that could also impact the outlook for rates.

Software stocks turned in some of the market’s best performances on the day, driving the Dow Jones U.S. Software Index up by 1.2 percent.

An increase by the price of gold also contributed to strength among gold stocks, as reflected by the 1.2 percent gain posted by the NYSE Arca Gold Bugs Index.

Networking and retail stocks also saw notable strength, while telecom, utilities and natural gas stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are jumping $0.72 to $62.98 a barrel after rising $0.39 to $62.26 a barrel on Monday. Meanwhile, after climbing $24.10 to $3,677.40 an ounce in the previous session, gold futures are increasing $10.40 to $3,687.80 an ounce.

On the currency front, the U.S. dollar is trading at 146.92 yen compared to the 147.50 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is trading at $1.1731 compared to yesterday’s $1.1763.

Asia

Asian stocks turned in a mixed performance on Tuesday amid global political turmoil and ahead of key U.S. inflation readings due this week that could influence the Federal Reserve’s interest rate trajectory.

Amid growing concerns over a softening U.S. labor market, traders currently expect almost three Fed cuts this year, starting this month.

China’s Shanghai Composite Index fell 0.5 percent to 3,807.29, a day after data showed Chinese export growth slowed to the weakest in six months. Chipmaking giant SMIC plummeted 10.3 percent after an acquisition deal.

Hong Kong’s Hang Seng Index jumped 1.2 percent to 25,938.13, hitting a four-year high after the Nasdaq notched a record-high close overnight on Fed rate cut hopes.

Japanese stocks ended lower after posting strong gains in the previous session on optimism over trade and expectations for looser fiscal policy following the resignation of fiscal hawk Prime Minister Shigeru Ishiba.

The Nikkei 225 Index climbed past the key 44,000 mark for the first time before surrendering early gains to settle 0.4 percent lower at 43,459.29. The broader Topix Index closed down 0.5 percent at 3,122.12.

Tech stocks followed their U.S. peers higher, with chip-testing equipment maker and Nvidia supplier Advantest surging 6.5 percent and Tokyo Electron rising over 2 percent.

Seoul stocks rose for a sixth consecutive session to a yearly high as tech and chemical stocks gained ground on expectations of a policy reversal regarding market-friendly tax reforms. The Kospi shot up 1.3 percent to 3,260.05, surpassing the previous record set on July 30.

Australian markets fell notably, with banks declining after ANZ said it would cut 3,500 jobs next year as part of a wide-ranging revamp under new Chief Executive Officer Nuno Matos.

Miners also succumbed to profit taking due to concerns over weak Chinese demand during the military parade week. The benchmark S&P/ASX 200 Index dropped 0.6 percent to 8,793.60, while the broader All Ordinaries Index closed 0.6 percent lower at 9,071.20.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index slipped 0.2 percent to 13,253.73, snapping a three-day winning streak.

Europe

European stocks are mixed on Tuesday, with France’s political crisis and upcoming U.S. inflation data in the spotlight.

Investors shrugged off data that showed French industrial production declined by 1.1 percent in July compared to June, mainly on lower aircraft production.

While the German DAX Index is down by 0.4 percent, the U.K.’s FTSE 100 Index is up by 0.3 percent and the French CAC 40 Index is up by 0.4 percent.

Dutch chipmaking equipment company ASML Holding is modestly higher on news it would invest €1.3 billion ($1.5 billion) in France’s Mistral AI.

Vodafone has also gained after the British telecommunications company launched a cash tender offer to purchase any and all of its outstanding $500 million capital securities due 2081.

Anglo American has moved sharply higher after it agreed to merge with Canada’s Teck Resources in a $50 billion deal.

Italy’s Monte dei Paschi di Siena has also shown a strong move to the upside after it secured a majority stake in Mediobanca SpA.

Meanwhile, Dunelm has plunged. The housewares retailer said it was yet to see signs of a sustained consumer recovery in the market.

Mining giant BHP is also moving lower after reaching an agreement to settle the Australian Samarco shareholder class action.

U.S. Economic News

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $58 billion worth of three-year notes.