Stocks on Wall Street showed little movement as investors awaited the release of a critical report on consumer inflation, which could influence the Federal Reserve’s decision on interest rates. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite hovered around the same levels. The Consumer Price Index (CPI) report indicated that inflation remained stable in September, but rising slightly faster than economists expected. While consumer prices increased 3.7% year over year, on a monthly basis, they saw a 0.4% increase.
The stock market’s response:
Stocks on Wall Street opened virtually unchanged Thursday as investors digested a crucial report on consumer inflation that could influence whether the Federal Reserve decides to raise or hold interest rates. The Dow Jones Industrial Average (^DJI), the S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) hovered around the flat line.
Inflation data analysis:
On Thursday, Wall Street was very focused on the Consumer Price Index (CPI) report, which showed that inflation remained stable in September but rose at a slightly faster pace than economists expected. Consumer prices rose 3.7% from last year in September, matching the increase in August. On a monthly basis, consumer prices increased by 0.4%.
The market’s winning streak:
Major U.S. stock indexes notched their fourth consecutive winning session on Wednesday, as investors shrugged off better-than-expected wholesale inflation data.
Federal Reserve Opinion:
Minutes from the Federal Reserve’s latest meeting showed that most policymakers predict one more interest rate hike this year, although they still emphasized that economic data will guide their decision-making.
Season of results and market expectations:
Eyes are also on the third-quarter earnings season, which begins Thursday with reports from Delta (DAL) and Walgreens (WBA), and then begins in earnest with results from the big banks on Friday. Earnings growth is expected to be moderate, but some analysts believe a low level could lead to some surprises.
Oil prices and global developments:
Oil prices erased their recent decline after a show of unity from Russia and Saudi Arabia, which pledged to make further cuts in crude production. But market sentiment remains fragile as Israel builds forces for an expected ground attack on Gaza. Crude oil futures (CL=F) rose above $84 a barrel, while Brent crude futures (BZ=F) rose to trade closer to $87.
Federal Reserve’s stance on rates:
Thursday’s inflation report was slightly better than expected. But by removing volatile categories like food, energy and housing, economists see a downward trajectory, a welcome sign for the Federal Reserve, which spent the days leading up to the inflation reading indicating a bias against raising interest rates in November.
Market response to economic data:
After a tough two weeks with rising yields and the Federal Reserve’s “higher for longer” stance weighing on stocks, last Friday’s jobs report brought a clear shift in investor sentiment. The report showed a still tight labor market adding more jobs than expected, but with wages growing at their slowest pace in more than two years.
Moderated Comments and Market Impact:
The dovish comments from Fed officials followed the jobs report, as many at the central bank are beginning to believe that the recent rise in bond yields could be prompting monetary tightening for them. This, officials said, could lead to the Federal Reserve not raising rates in November.
Market bets on Federal Reserve increases:
The confluence of the comments with recent economic data has pushed markets to increasingly bet that there will be no further Fed rate hikes in 2023. As of Thursday morning, markets are pricing in a 12% chance that the Fed will raise rates in November, up from a 41% chance a month ago.
Market openings:
Stocks were quiet at the opening bell on Thursday as investors digested a mixed inflation report. The Dow Jones Industrial Average (^DJI), S&P 500 (^GSPC), and Nasdaq Composite (^IXIC) were little changed.
Inflation figures:
The consumer price index (CPI) rose 0.4% from last month and 3.7% from a year ago in September, according to the latest data from the Bureau of Labor Statistics. The year-over-year increase was slightly higher than economists’ forecasts for a 3.6% annual jump, according to Bloomberg data. Economists expected a month-on-month increase of 0.3%.
Core inflation:
On a “core” basis, which excludes the more volatile costs of food and gas, prices in September rose 4.1% from last year, a slowdown from the 4.3% annual increase seen in August, according to Bloomberg data. Monthly core prices rose 0.3%, in line with economists’ projections and unchanged from the previous month.
Futures and Anticipations:
Stocks were poised to open in the green on Thursday as investors awaited the release of U.S. consumer inflation data. Dow Jones Industrial Average futures (^DJI) rose 0.33%, or 112 points, while S&P 500 futures (^GSPC) rose 0.37%. Contracts on the tech-heavy Nasdaq 100 (^NDX) rose 0.34%.
Also read: Stock market shows resilience to rising PPI