Stocks Tread Water Before the Open as U.S. Inflation Data Looms

Oleksandr Pylypenko - Barchart - Wed Sep 13, 2023

September S&P 500 futures (ESU23) are down -0.02%, and September Nasdaq 100 E-Mini futures (NQU23) are down -0.04% this morning as market participants geared up for a key U.S. consumer inflation report that is anticipated to provide further insights into the Federal Reserve’s next steps.

In Tuesday’s trading session, Wall Street’s major averages closed lower. Oracle Corporation (ORCL) tumbled over -13% and was the top percentage loser on the benchmark S&P 500 after the IT services giant’s first-quarter report showed a slowdown in cloud revenue, while its quarterly sales fell short of expectations. Also, Advance Auto Parts Inc (AAP) slid more than -8% after S&P Global Ratings downgraded the auto parts retailer’s credit and debt ratings to “junk” status. In addition, Apple Inc (AAPL) fell over -1% after the tech giant unveiled the new iPhone 15 product line and the next generation of Apple Watch. On the bullish side, WestRock Co (WRK) climbed more than +2% after agreeing to merge with Europe’s Smurfit Kappa to form a $20 billion packaging giant. Energy stocks also gained ground as the price of WTI crude rose over +1% to a nearly 10-month high.

“People are a little bit worried about energy prices picking up pretty aggressively in recent weeks, and that creates some concerns as we look forward to November when some investors worry Federal Reserve policymakers may raise rates again,” said Thomas Hayes, chairman at Great Hill Capital LLC.

Meanwhile, U.S. rate futures have priced in a 7.0% probability of a 25 basis point rate increase at September’s monetary policy meeting and a 38.2% probability of a 25 basis point rate hike at the November meeting.

Today, all eyes are focused on the U.S. consumer inflation report in a couple of hours. Economists, on average, forecast that August U.S. CPI will come in at +0.6% m/m and +3.6% y/y, compared to the previous values of +0.2% m/m and +3.2% y/y.

Also, investors will likely focus on U.S. Core CPI data. Economists anticipate Core CPI to be +0.2% m/m and +4.3% y/y in August, compared to the previous figures of +0.2% m/m and +4.7% y/y.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -1.912M, compared to last week’s value of -6.307M.

In the bond markets, United States 10-year rates are at 4.307%, up +0.99%.

The Euro Stoxx 50 futures are down -0.61% this morning as investors digested disappointing U.K. growth numbers while gearing up for a crucial U.S. inflation report due later in the day. Losses in technology stocks are leading the overall market lower. Data from the Office for National Statistics revealed on Wednesday that the U.K.’s economy experienced an unexpectedly sharp contraction in July, with strikes in hospitals and schools, along with unusually rainy weather, exerting downward pressure on output. Meanwhile, market participants increased wagers on European Central Bank policy tightening at its meeting on Thursday following a Reuters report indicating the central bank’s anticipation of inflation remaining above 3% next year. In corporate news, Aviva Plc (AV-.LN) rose over +2% after the British insurer announced its withdrawal from the Singlife joint venture and the sale of its 25.9% stake in Singapore Life Holdings, along with two debt instruments to Sumitomo Life.

U.K.’s GDP, U.K.’s Industrial Production, U.K.’s Manufacturing Production, U.K.’s Monthly GDP 3M/3M Change, and Eurozone’s Industrial Production data were released today.

U.K. July GDP has been reported at -0.5% m/m and 0.0% y/y, weaker than expectations of -0.2% m/m and +0.4% y/y.

U.K. July Industrial Production stood at -0.7% m/m and +0.4% y/y, weaker than expectations of -0.6% m/m and +0.5% y/y.

U.K. July Manufacturing Production came in at -0.8% m/m and +3.0% y/y, stronger than expectations of -1.0% m/m and +2.7% y/y.

U.K. July Monthly GDP 3M/3M Change was at +0.2%, weaker than expectations of +0.3%.

Eurozone July Industrial Production arrived at -1.1% m/m and -2.2% y/y, weaker than expectations of -0.7% m/m and -0.3% y/y.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.45%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.21%.

China’s Shanghai Composite today closed lower as investors awaited further indications of stimulus measures to support the world’s second-largest economy while also bracing for key U.S. inflation data. A BofA Securities survey on Asia fund managers revealed that sentiment regarding China remains lackluster. “Easing expectations abound, but the sustained lack of a concerted action has pushed risk appetite to rock bottom,” the survey said. Meanwhile, information technology, semiconductor, and new energy stocks lost ground Wednesday. On the positive side, Chinese property developers outperformed after beleaguered developer Country Garden Holdings Co Ltd won creditor support to extend repayment on seven yuan bonds. Investor attention for the week is centered on the crucial data releases of Chinese retail sales and industrial production for August, due on Friday.

Japan’s Nikkei 225 Stock Index closed slightly lower today as investors exercised caution while awaiting crucial U.S. inflation data. Data on Wednesday showed that Japan’s annual wholesale inflation decelerated in August for an eighth consecutive month. Separately, a Reuters poll indicated that business confidence in the country’s largest firms decreased in early September, reflecting mounting apprehensions about a slowdown in China, one of Japan’s biggest export markets. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +1.54% to 16.48.

The Japanese August PPI stood at +0.3% m/m and +3.2% y/y, compared to expectations of +0.1% m/m and +3.2% y/y.

Pre-Market U.S. Stock Movers

Workhorse Group Inc (WKHS) surged over +22% in pre-market trading after the company announced that it had received IRS approval as a qualified manufacturer for the Commercial Clean Vehicle Credit under the terms of the Internal Revenue Code.

Rocket Pharmaceuticals Inc (RCKT) soared more than +18% in pre-market trading after announcing that alignment has been reached with the Food and Drug Administration on the global Phase 2 pivotal trial of RP-A501 for Danon Disease.

Ford Motor Company (F) rose over +1% in pre-market trading after UBS initiated coverage of the stock with a Buy rating.

Squarespace Inc (SQSP) slid more than -3% in pre-market trading after the company priced a secondary underwritten public offering of 5 million shares of its Class A common stock.

Eiger Biopharmaceuticals Inc (EIGR) plunged over -34% in pre-market trading after the company said it would stop its late-stage trial of peginterferon lambda in patients with chronic hepatitis D.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - September 13th

Burford (BUR), Cracker Barrel Old (CBRL), Semtech (SMTC), Rev Group (REVG), IBEX (IBEX), Radiant (RLGT), Selectquote (SLQT).

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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.