Wall Street remains laser-focused on a crucial July inflation reading before the bell that could trigger near-term changes to Fed rate hike bets.
U.S. equity futures nudged higher Wednesday, while the dollar slipped lower against its global peers, as investors braced for a key July inflation reading that could either cement the Federal Reserve’s monetary tightening agenda or trigger a pullback in rate-hike bets.
Headline CPI is expected to have eased last month from the 41-year peak rate of 9.1% it reached in June, potentially triggering a series of slower accelerations over the months ahead. U.S. economic data of late has been mixed, however, and last week’s blowout jobs report ,which included 528,000 new hires alongside wage growth of 5.2%, could add to inflationary pressures heading into the autumn.
The CME Group’s FedWatch is pricing in a 66.5% chance of a 75 basis point Fed rate hike in September, which would take its target rate to between 3% and 3.25% , with the bulk of expectation pointing to a range of between 3.5% and 3.75% by the end of the year.
That’s kept the U.S. dollar index, which tracks the greenback against a basket of six global currency peers, within touching distance of the two-decade highs it reached last month, a move that has added significant headwinds to corporate earnings prospects as companies find it increasingly expensive to bring home overseas profits.
The dollar index was marked 0.26% lower in overnight trading at 106.097 while benchmark 10-year Treasury notes yields were stable at 2.768% heading into the July inflation reading.
In overseas markets, European stocks were essentially flat amid the traditional August holiday lull, with the Stoxx 600 up 0.06% in mid-day Frankfurt trading, while overnight in Asia the region-wide MCSI ex-Japan index fell 1.07% amid a pullback in China stocks following data showing factory gate inflation fell to the lowest levels in 17 months amid a pullback in demand for raw materials in the world’s second largest economy.
The softer China inflation reading added downward pressure on oil prices, as well, with WTI crude futures for September delivery falling $1.23 to $89.27 per gallon ahead of Energy Department data on domestic crude stockpiles slated for 10:30 am Eastern time.
On Wall Street, futures tied to the S&P 500 are indicating a 14.5 point opening bell gain while those liked to the Dow Jones Industrial Average are priced for a 65 point bump. Futures linked to the tech-focused Nasdaq are indicating a 22 point advance.
In the tech space, Apple (AAPL) – Get Apple Inc. Report shares edged higher after Foxconn, the world’s biggest electronics manufacturer, posted better-than-expected second quarter earnings Wednesday but cautioned that waning smartphone demand would keep revenues in check heading into the autumn months.
Tesla (TSLA) – Get Tesla Inc. Report and Twitter (TWTR) – Get Twitter Inc. Report were the most active in pre-market trading, however, ollowing news from late last night that CEO Elon Musk had sold around $7 billion worth of stock in order to set aside funding for his disputed takeover of the social media platform.
Walt Disney (DIS) – Get The Walt Disney Company Report shares edged higher ahead of the media and entertainment giant’s third quarter earnings after the closing of trading, with investors focused on subscriber gains in its signature Disney+ steaming division.
Coinbase Global (COIN) – Get Coinbase Global Inc Report shares, meanwhile, slumped 5.9% after the crypto trading platform posted a wider-than-expected second quarter loss amid the ongoing slide in bitcoin and other digital tokens.