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 Friday, with stocks likely to extend yesterday’s lackluster performance early in the session.

Traders may be reluctant to make significant moves ahead of the release of closely watched consumer price inflation shortly after the start of trading.

The Federal Reserve’s preferred inflation readings, which are included in a report on personal income and spending, could impact the outlook for interest rates ahead of next week’s monetary policy meeting.

Consumer prices are expected to climb by 0.3 percent in September, matching the increase seen in August. Core consumer prices, which exclude food and energy prices, are expected to rise by 0.2 percent.

“A higher-than-expected reading could give the Fed pause for thought about a pre-Christmas cut, while an in line or lower number would likely give markets further confidence about such a move,” said AJ Bell investment director Russ Mould.

However, with the long-delayed report looking back to September, the impact of the data on the outlook for rates may be somewhat subdued.

CME Group’s FedWatch Tool is currently indicating an 87.2 percent chance the Fed will lower interest rates by another quarter point next week.

The University of Michigan is also due to release its preliminary reading on consumer sentiment in the month of December. The consumer sentiment index is expected to rise to 52.0 in December after falling to 51.0 in November.

After moving higher over the two previous sessions, stocks showed a lack of direction over the course of the trading day on Thursday. The major averages spent the day bouncing back and forth across the unchanged line before eventually closed narrowly mixed.

While the Nasdaq rose 51.04 points or 0.2 percent to 23,505.14 and the S&P 500 inched up 7.40 points or 0.1 percent to 6,857.12, the narrower Dow edged down 31.96 points or 0.1 percent to 47,850.94.

The lackluster performance on Wall Street came as traders took a step back to assess the near-term outlook for the markets following the volatility seen earlier in the week.

Stocks pulled back on Monday after last week’s week rally only to regain ground during relatively choppy trading on Tuesday and Wednesday.

Optimism about another interest rate cut by the Federal Reserve next week helped the major averages more than offset Monday’s decline.

Meanwhile, traders largely shrugged off a report from the Labor Department showing first-time claims for U.S. unemployment benefits unexpectedly fell to a three-year low in the week ended November 29th.

The report said initial jobless claims slid to 191,000, a decrease of 27,000 from the previous week’s revised level of 218,000.

Economist had expected jobless claims to rise to 220,000 from the 216,000 originally reported for the previous week.

With the unexpected decline, jobless claims dropped to their lowest level since hitting 189,000 in the week ended September 24, 2022.

While the data partly offset recent optimism about the Federal Reserve cutting interest rates next week, the central bank is still widely expected to lower rates by another quarter point.

“Initial claims can be subject to big swings at this time of the year, so we won’t read much into one week’s number,” Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

She added, “Still, initial claims have remained in a range consistent with a relatively low pace of job losses despite recent layoff announcements.”

While most of the major sectors showed only modest moves on the day, computer hardware stocks saw a substantial rebound, with the NYSE Arca Computer Hardware Index surging by 3.0 percent after slumping by 1.7 percent on Wednesday.

Significant strength was also visible among brokerage stocks, as reflected by the 1.8 percent gain posted by the NYSE Arca Broker/Dealer Index.

On the other hand, housing stocks showed a notable move to the downside, dragging the Philadelphia Housing Sector Index down by 1.6 percent.

Commodity, Currency Markets

Crude oil futures are edging down $0.07 to $59.60 a barrel after jumping $0.72 to $59.67 a barrel on Thursday. Meanwhile, after rising $10.50 to $4,243 ounce in the previous session, gold futures are climbing $23.20 to $4,266.20 an ounce.

On the currency front, the U.S. dollar is trading at 155.14 yen versus the 155.08 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1650 compared to yesterday’s $1.1643.

Asia

Asian stocks turned in another mixed performance during trading on Friday. Japanese markets led regional losses after government data showed household spending in the country unexpectedly slumped at the fastest pace in nearly two years in October.

Tech stocks came under selling pressure as investors await key U.S. inflation data later in the day for direction ahead of next week’s Federal Reserve meeting.

A softer dollar helped lift gold prices while crude oil prices were little changed in Asian trading.

China’s Shanghai Composite Index climbed 0.7 percent to 3,902.81 ahead of key data next week, including inflation, trade and producer prices. Investors also waited for policy signals from key policy meetings this month. Hong Kong’s Hang Seng Index rose 0.6 percent to 26,085.08.

Japan’s Nikkei 225 Index slumped 1.1 percent to 50,491.87, with technology stocks pacing the declines. Advantest and Tokyo Electron both fell over 2 percent.

SoftBank Group shares surged nearly 6 percent on news its chip unit, Arm Holdings, plans to set up a chip design facility in South Korea. The broader Topix Index settled 1.1 percent lower at 3,362.56.

Seoul stocks rose sharply as automakers surged amid reduced U.S. tariff concerns. Hyundai Motor shares spiked 11.1 percent and Kia Corp. added 2.7 percent. The benchmark Kospi Index surged 1.8 percent to 4,100.05.

Australian markets eked out modest gains after data showed Australian household spending climbed across all nine categories in October.

The benchmark S&P/ASX 200 Index edged up 0.2 percent to 8,634.60, while the broader All Ordinaries Index closed up 0.2 percent at 8,926.10.

Premier Investments plunged nearly 16 percent after issuing earnings guidance below market expectations. Rio Tinto dropped 1.5 percent after its new CEO pushed a sweeping overhaul aimed at tightening costs.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index slipped 0.2 percent to 13,483.99, extending losses for a second day running.

Europe

European stocks are moving higher for a fourth consecutive session on Friday after data showed German factory orders grew more than expected in October on robust domestic demand.

Factory orders logged monthly growth of 1.5 percent, Destatis said. Although the pace of growth softened from the revised 2.0 percent jump in September, it was much faster than economists’ forecast of 0.3 percent. On a yearly basis, factory orders dropped 0.7 percent following a 3.4 percent decrease in September.

Revised data from Eurostat showed the euro area economy logged faster-than-estimated growth in the third quarter, underpinned by government spending and investment.

Gross domestic product grew 0.3 percent sequentially compared to a marginal increase of 0.1 percent in second quarter. The third quarter growth was revised up from 0.2 percent

Investors also await key U.S. inflation data later in the day that could help shape the Federal Reserve’s interest-rate decision next week.

While the German DAX Index is up by 0.9 percent, the French CAC 40 Index is up by 0.3 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

Ocado has surged. The tech platform and online grocer will receive a one-time cash payment of $350 million from Kroger Co. after the U.S. grocer decided to close three fulfillment centers and cancel plans for a Charlotte, North Carolina site.

Airbus shares have also shown a notable move to the upside in Paris after an update that the company delivered 72 aircraft in November.

On the other hand, Zurich-domiciled global reinsurer Swiss Re has moved sharply lower after setting its targets for 2026.

U.S. Economic News

The Commerce Department is scheduled to release its report on personal income and spending in the month of September at 10 am ET. The report includes the Federal Reserve’s preferred readings on consumer price inflation.

Consumer prices are expected to climb by 0.3 percent in September, matching the increase seen in August. Core consumer prices, which exclude food and energy prices, are expected to rise by 0.2 percent.

Also at 10 am ET, the University of Michigan is due to release its preliminary reading on consumer sentiment in the month of December. The consumer sentiment index is expected to rise to 52.0 in December after falling to 51.0 in November.

The Federal Reserve is scheduled to release its report on consumer credit in the month of October at 3 pm ET. Consumer credit is expected to increase by $9.4 billion in October after climbing by $13.1 billion in September.