As Wednesday dawns, stock futures are exhibiting caution, with investors anxiously awaiting the release of the crucial August Consumer Price Index (CPI) report. This report, along with Thursday’s Producer Price Index (PPI) report, will be key indicators for the Federal Reserve as they weigh their interest rate decision following their upcoming meeting next Wednesday.
Adding to the market’s cautious mood is the recent presidential debate. While the debate’s outcome is still being analyzed, Vice President Kamala Harris is widely considered the victor over Republican candidate Donald Trump. This result could potentially lead to a slightly negative market sentiment, as Trump has been seen as market-friendly. However, this could also be a boon for specific sectors, particularly green energy stocks, which stand to benefit from Harris’s policies.
Despite the debate’s influence, the CPI report is the dominant market driver for the day. Fund manager Louis Navellier expects a positive CPI report for August, citing the possibility of continued moderation in shelter costs. He also anticipates a favorable PPI report on Thursday, suggesting that wholesale service and goods costs have softened. These expectations have led him to predict a decline in Treasury yields.
Analysts are, however, offering a more nuanced perspective. Mark Newton, Global Head of Technical Strategy at Fund Strat, acknowledges that market sentiment isn’t as optimistic as he would like. He attributes this to the current contentious presidential election, the ongoing overseas wars, and the seasonally weak period. Nonetheless, he points out that earnings have been exceptionally strong, and the stock market itself has performed well. He predicts a potential pullback over the next week, possibly reaching a low point around 53 before turning higher following the Fed meeting.
Meanwhile, in premarket trading, the SPDR S&P 500 ETF Trust (SPY) has dropped 0.25% to $547.50, while the Invesco QQQ ETF (QQQ) has slipped 0.29% to $457.35.
Looking at the broader market, Tuesday’s session closed on a mixed note, with risk aversion heightened following Oracle Corp.’s (ORCL) strong results and its impact on the artificial intelligence trades. While the major averages started strong, momentum waned mid-session, leading to a dip below the unchanged line. This mid-session weakness was fueled by a pullback in financial stocks after JPMorgan Chase & Co. (JPM) presented a muted outlook at an industry conference. Energy stocks also contributed to the downward pressure after WTI-grade crude oil futures plummeted over 4%. However, stocks staged a strong recovery later in the day, with the Nasdaq Composite and S&P indices closing higher for the second consecutive day, while the Dow Jones Industrial Average settled slightly lower.
In the commodities markets, crude oil futures have rebounded strongly in early New York trading, and safe-haven gold remains above the $2,550 level. Bitcoin, however, has fallen sharply after the presidential debate, trading down to $56.5K, as Trump is widely perceived as the loser of the face-off. The 10-year Treasury note yield has dipped 2.2 basis points to 3.622%, following its drop to its lowest level in over a year on Tuesday.
Global markets are showing mixed results. Asian stocks have declined across the board, with the Japanese market particularly weak due to the yen’s strength. Apprehension ahead of the US inflation data has also dampened sentiment in the region. European markets are exhibiting modest strength, though the UK market is slightly weaker due to the release of several soft domestic economic data points.
