Stock Market Today: Stocks Inch Higher Ahead of CPI Inflation Report
U.S. equity futures showed modest gains in early Wednesday trading as investors prepared for a crucial July inflation report, which could influence the Federal Reserve’s decisions on interest rate cuts next month. Despite recent global market volatility, stocks ended higher yesterday, with the S&P 500 closing at levels seen before last week’s market turmoil. This positive movement was partly driven by a softer-than-expected factory gate inflation report and a recovery in major technology stocks.
The National Federation of Independent Business (NFIB) reported elevated small business optimism, which added to the bullish sentiment in the market. Investors are looking to build on the S&P 500’s five-day advance, awaiting today’s inflation data to provide further direction.
Economists anticipate that headline inflation for July will remain steady at 3%, still above the Federal Reserve’s 2% target. Core inflation is expected to ease slightly to 3.2% on an annual basis. Federal Reserve Chair Jerome Powell is seeking more data to confirm that inflation is trending toward the central bank’s target.
According to the CME Group’s FedWatch tool, there is a 52.5% probability of a 50 basis point rate cut from the Fed at its next meeting in September, with a 47.5% chance of a smaller 25 basis point reduction. Traders are also expecting additional rate cuts in the Fed’s subsequent meetings, including one in January 2025.
Ian Shepherdson of Pantheon Macroeconomics believes that the CPI data will not hinder aggressive Fed easing measures to support the slowing economy. As of early Wednesday, benchmark 10-year Treasury note yields were stable at 3.833%, while 2-year notes were at 3.929%. The U.S. dollar index was down slightly by 0.08%, standing at 102.474 against a basket of global currencies.
On Wall Street, stock futures were largely unchanged, with the S&P 500 indicated to rise by 4 points, the Nasdaq up by 15 points, and the Dow Jones Industrial Average set for a modest 17-point gain. Alphabet (GOOGL) was a notable early mover, falling 1.1% in premarket trading following a report that the Department of Justice is considering breaking up Google after a recent antitrust victory.
In Europe, the FTSE 100 in London gained 0.38% as investors anticipated rate cuts following a softer-than-expected July inflation report. The regional Stoxx 600 benchmark rose by 0.16% in Frankfurt.
In Asia, the Nikkei 225 in Tokyo ended 0.58% higher, and the MSCI ex-Japan benchmark was up 0.56% as the region closed its trading session.
Overall, the market is closely watching upcoming inflation data and Fed decisions, with key indicators pointing towards potential rate adjustments in the near future.
