NASDAQ 100, Dow Jones, S&P 500: Futures Edge Higher Ahead of Inflation Data

Highlights

• U.S. stock futures edge higher in anticipation of inflation report.
• Dow Transports reaching a new 52-week high.
• Investors eagerly await CPI release, influencing the Fed’s decision on interest rates.

Overview

U.S. stock futures are edging higher on Wednesday, with investors eagerly anticipating the release of an important inflation report. In the previous session, stocks ended on a positive note, as the Dow Jones soared over 300 points, equivalent to a 0.9% gain. The S&P 500 and Nasdaq Composite also saw gains of nearly 0.7% and 0.6% respectively.

The Dow Jones Transportation Average, a 20-stock index that includes railways and airlines, achieved a new 52-week high, dating back to April 1, 2022, which stands out as a notable highlight. In 2023, Dow Transports have surged by 19%, significantly outperforming the Dow Jones Industrial Average, which has recorded a gain of approximately 3.4%. Noteworthy gainers within the index include Delta Air Lines and United Airlines, both experiencing nearly 50% increases this year.

At 09:14 GMT, blue chip Dow futures are trading 34513.00, up 49.00 or +0.14%. Benchmark S&P 500 Index futures are at 4481.50, up 8.00 or +0.18% and tech-weighted Nasdaq Composite futures are trading 15292.00, up 32.00 or +0.21%.

June Consumer Price Index on Tap

Today, investors are eagerly awaiting the release of the June consumer price index (CPI) reading, scheduled to be unveiled before the market opens. Economists surveyed by Dow Jones project that this closely followed inflation indicator will increase by 0.3% from May and 3.1% on an annualized basis. Economists anticipate that the core CPI, which excludes volatile food and energy prices, will rise by 0.3% on the month and 5% on the year.

CPI, PPI Reports to Influence Fed’s Rate Trajectory

Additionally, market participants are keeping an eye on the producer price index (PPI) data for June, set to be released on Thursday. Both the CPI and PPI are crucial inflation gauges, providing insights into the potential trajectory of inflation. Investors see these indicators as key factors influencing the Federal Reserve’s decision on interest rates. Currently, the market is pricing in a roughly 92% chance of a rate hike at the upcoming July meeting, according to CME’s FedWatch Tool.

Yields Dip Ahead of CPI, Fed Speakers

Meanwhile, U.S. Treasury yields declined as investors awaited the CPI data and listened for any remarks from central bank officials, including Tom Barkin, Neel Kashkari, Raphael Bostic, and Loretta Mester, throughout the day. Market participants anticipate that these statements will provide further insights into the state of U.S. economic policy.

Traders Gearing Up for Earnings Season

Looking ahead, market participants are preparing for the second-quarter earnings season, with several major companies, including JPMorgan Chase, Wells Fargo, Citigroup, BlackRock, PepsiCo, Delta Air, and UnitedHealth, scheduled to report their financial results later this week.

Short-Term Outlook:  Bullish

The positive performance of U.S. stock futures suggests a bullish sentiment as investors eagerly await the release of the important CPI report. The recent gains in the Dow Jones and other indices, along with the Dow Jones Transportation Average reaching a new 52-week high, reflect a strong market outlook.

The projected increase in the CPI, both on a monthly and annualized basis, may have implications for the Federal Reserve’s interest rate decision. Market participants are closely monitoring these inflation gauges, as they provide valuable insights into the trajectory of inflation and its potential impact on stock prices. The upcoming earnings season and the reports from major companies will further shape market sentiment in the days ahead.