Tamer-Than-Expected Inflation Data May Lead To Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to move to the upside after ending yesterday’s choppy session modestly lower.

The futures advanced following the release of a closely watched Commerce Department report showing consumer prices rose by slightly less than expected in the month of August.

The Commerce Department said its personal consumption expenditures (PCE) price index increased by 0.3 percent in August following a revised 0.1 percent uptick in July.

Economists had expected prices to climb by 0.4 percent compared to the 0.2 percent increase originally reported for the previous month.

The report also said the annual rate of growth by the PCE price index came in at 3.4 percent in August, unchanged from a revised reading in July.

The annual rate of growth was expected to remain unchanged compared to the 3.7 percent growth originally reported for the previous month.

Excluding food and energy prices, the core PCE price index rose by 0.2 percent in August after inching up by a revised 0.1 percent in July.

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

The annual rate of growth by the core PCE price index came in at 3.0 percent in August, unchanged from a revised reading in July.

Economists had expected the annual rate of growth to remain unchanged compared to the 3.3 percent growth originally reported for the previous month.

Meanwhile, a separate report released by payroll processor ADP showed private sector employment in the U.S. jumped by more than expected in the month of September.

ADP said private sector employment shot up by 90,000 jobs in September after rising by a downwardly revised 36,000 jobs in August.

Economists had expected private sector employment to increase by 70,000 jobs compared to the addition of 38,000 jobs originally reported for the previous month.

Stocks showed a lack of direction throughout the trading session on Tuesday, with the major averages spending the day bouncing back and forth across the unchanged line following the weakness seen during the previous session.

The major averages eventually ended the day modestly lower. The Dow fell 131.59 points or 0.3 percent to 51,349.92, the Nasdaq edged down 22.84 points or 0.1 percent to 26,797.54 and the S&P 500 dipped 12.85 points or 0.2 percent to 6,760.84.

The choppy trading on Wall Street came as traders seemed reluctant to make significant moves ahead of the release of today’s closely watched consumer price inflation data.

Traders also kept an eye on the price of crude oil, which saw considerable volatility over the course of the day. After surging by as much as 2.3 percent earlier in the day, U.S. crude oil futures plunged by 3.5 percent.

Despite the pullback by the price of crude oil, treasury yields turned higher over the course of the session, extending a recent upward trend.

On the U.S. economic front, a report released by the Conference Board unexpectedly showed a notable deterioration in U.S. consumer confidence in the month of September.

The Conference Board said its consumer confidence index slumped to 81.9 in September from a downwardly revised 88.6 in August.

Economists had expected the consumer confidence index to inch up to 90.0 from 89.4 originally reported for the previous month.

Reflecting the lackluster close by the broader markets, most of the major sectors ended the day showing only modest moves.

However, oil service stocks moved sharply lower along with the price of crude oil, dragging the Philadelphia Oil Service Index down by 2.4 percent to its lowest closing level in two months.

Notable weakness was also visible among telecom stocks, as reflected by the 1.3 percent loss posted by the NYSE Arca North American Telecom Index.

On the other hand, semiconductor stocks showed a strong move to the upside, driving the Philadelphia Semiconductor Index up by 1.3 percent.

Commodity, Currency Markets

Crude oil futures are jumping $1.14 to $90.52 a barrel after plummeting $3.22 to $89.38 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $4,242.30, up $62.60 compared to the previous session’s close of $4,179.70. On Tuesday, gold rose $11.30.

On the currency front, the U.S. dollar is trading at 156.80 yen compared to the 157.28 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1367 compared to yesterday’s $1.1340.

Asia

Asian stock markets closed on a mostly positive note on Wednesday as the likelihood of a Fed rate hike diminished significantly. Easing bond yields as well as momentum among tech stocks also bolstered sentiment.

However, lingering anxiety ahead of updates to inflation and labor market due from the U.S. on Wednesday morning limited gains.

China’s Shanghai Composite Index rose 0.3 percent from the previous close of 3,830.45 to finish trading at 3,842.19. The day’s trading ranged between $3,833.09 and $3,851.22. At current levels, the index has lost more than 1 percent over the course of the past year.

The Japanese benchmark Nikkei 225 225 Index jumped 1.9 percent to close trading at 66,753.72. The day’s trading ranged between 66,946.14 and 66,014.48 amidst a rebound led by tech stocks.

SUMCO Corp surged 9.1 percent followed by Resonac Holdings that added 7.7 percent. Murata Mfg Co slipped 2.94 percent. Nichirei Corp also lost 1.3 percent.

The Hang Seng Index of the Hong Kong Stock Exchange climbed 0.4 percent from the previous close to finish trading at 24,613.27. The day’s trading range was between a high of 24,637.65 and a low of 24,332.64. The index has however lost close to 8.5 percent over the past year.

Korean Stock Exchange’s Kospi Index fell 0.5 percent from the previous close of 6,870.81 to close trading at 6,838.04. The day’s trading range was between 6,818.39 and 6,965.64. Nevertheless, the index is holding on to gains of close to 100 percent over the course of the past year.

Australia’s S&P/ASX 200 Index closed trading at 8,789.30, adding 0.9 percent from the previous close of 8,709.30. The day’s trading ranged between 8,696.8 and 8,808.40. The index is trading with losses of more than half percent over the course of the past year.

Lendlease group led gains with a surge of 11.3 percent. Karoon Energy followed with gains of close to 9 percent. Develop Global led losses with a decline of 10 percent followed by Deep Yellow that declined 5.3 percent.

The S&P/NZX 50 of the New Zealand Stock Exchange jumped 1.1 percent to close trading at 13,834.39. Easing crude oil prices supported sentiment. The day’s trading ranged between 13,660.10 and 13,845.58. The benchmark index has gained around 4.1 percent over the course of the past year.

Air New Zealand rallied 6.5 percent followed by SkyCity Entertainment that gained 6.2 percent. Synlait Milk led losses with a decline of 2.3 percent. Tourism Holdings followed with losses of more than a percent.

Europe

European stocks pared early gains and slipped into negative territory on Wednesday as oil prices rebounded amid continued uncertainty about U.S. and Iran reaching a deal to end their conflict anytime soon.

Weak regional economic data hurt German and French stocks, while U.K. stocks slightly outperformed thanks to stronger than expected GDP data.

Brent crude futures for December delivery climbed to $97.90 a barrel, gaining about 1.8 percent. Lingering concerns about energy supply due to a lack of progress in U.S.-Iran negotiations to reopen the Strait of Hormuz continued to render the oil market quite volatile.

While the U.K.’s FTSE 100 Index is up by 0.2 percent, the German DAX Index is down by 0.2 percent and the French CAC 40 Index is down by 0.4 percent.

In Germany, Commerzbank shed about 2.7 percent. Vonovia, Siemens Healthineers, Allianz, SAP and Siemens were down 0.8 percent-1.6 percent.

Zalando, Porsche Automobil Holding and BMW moved up 3.3 percent-3.5 percent. Volkswagen climbed nearly 2 percent, while Fresenius, MTU Aero Engines, Mercedes-Benz, RWE and BASF gained 1 percent-1.6 percent.

In Paris, EssilorLuxottica, Stellantis and Pernod Ricard climbed 2 percent, 1.6 percent and 1.5 percent, respectively. Renault moved up 1.1 percent, while Hermes International, Kering, Air Liquide and Sanofi posted moderate gains.

Teleperformance dropped about 6 percent. TotalEnergies, Publicis Groupe, AXA, BNP Paribas, Bouygues, Carrefour, Vinci, Unibail Rodamco, Dassault Systemes, Eurofins Scientific, Engie and Edenred lost 1 percent-2.5 percent.

In the UK market, Antofagasta, Reckitt Benckiser, SSE, National Grid, Marks & Spencer, Severn Trent and United Utilities gained 2 percent-3 percent.

The Sage Group, Ithaca energy, Relx, Experian, BT Group, BP, Shell, LSEG and Rolls-Royce Holdings lost 0.9 percent-2 percent.

Kingfisher, British Land, JD Sports Fashion, Croda International, ICG, Anglo American Plc, Spirax Group and Rio Tinto also moved up sharply.

Data from the Federal Employment Agency showed Germany’s unemployment increased more than expected in September, with the number of people out of work increasing by 12,000 from August, much larger than forecast of 1,000. This followed an increase of 5,000 in August.

At the same time, the unemployment rate remained unchanged at 6.4 percent in September. The rate also matched expectations.

Data from Destatis today showed that the adjusted jobless rate held steady at 4 percent in August. There were 1.76 million unemployed in August, up 9,000 from July, the labor force survey revealed. The unadjusted jobless rate rose to 4.3 percent in August from 3.9 percent in the last year.

Germany’s retail sales grew 1.3 percent on a monthly basis in August, reversing a 3.2 percent fall in July, data from Destatis showed. Sales were forecast to climb 1.6 percent.

On a yearly basis, retail sales fell 0.4 percent but slower than July’s 2.2 percent decrease.

Preliminary estimate from the statistical office INSEE said French inflation accelerated more than expected in September on energy and fresh food prices. Consumer price inflation rose to 3 percent from 2.4 percent in August. A similar higher rate was last seen in February 2024. The rate was also above economists’ forecast of 2.8 percent.

EU harmonized inflation climbed markedly to 3.4 percent from 2.6 percent in the prior month. The rate was seen at 3 percent.

On a monthly basis, consumer prices in France declined 0.3 percent, reversing a 0.7 percent rise in August. Prices were forecast to fall 0.5 percent.

Likewise, the harmonized index of consumer prices slid 0.4 percent, in contrast to the 0.7 percent rise in the prior month. The HICP was also expected to drop 0.5 percent.

Another report from INSEE showed that producer price inflation in the domestic market advanced to 4.8 percent from 3.5 percent in July. On a monthly basis, producer prices grew 1 percent, following July’s 1.3 percent increase.

Revised data from the Office for National Statistics showed the UK economy expanded more than estimated in the second quarter, with GDP posting a quarterly growth of 0.5 percent, revised up from 0.4 percent. This followed an increase of 0.6 percent in the first quarter.

In the second quarter, the services sector expanded 0.6 percent and construction grew 0.8 percent. On the other hand, the production sector shrank 0.1 percent. On the expenditure-side, there was a 0.3 percent increase in real household final consumption expenditure. Meanwhile, government spending dropped 0.5 percent.

U.S. Economic News

Private sector employment in the U.S. jumped by more than expected in the month of September, according to a report released by payroll processor ADP on Wednesday.

ADP said private sector employment shot up by 90,000 jobs in September after rising by a downwardly revised 36,000 jobs in August.

Economists had expected private sector employment to increase by 70,000 jobs compared to the addition of 38,000 jobs originally reported for the previous month.

“It’s a strong report,” said ADP Chief Economist Dr. Nela Richardson. “After a three-month slowdown, job creation rebounded and pay growth remained solid.”

The Commerce Department released a closely watched report on Wednesday showing consumer prices in the U.S. rose by slightly less than expected in the month of August.