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Inflation (Economics)

U.S. Equity Futures Advance Amid Inflation Worries Ahead of Pivotal Reading

Strategic Insights

— 2 min read

As investors look for confirmation of peak price pressures in the U.S. economy, economists expect a month-on-month decline in consumer price pressures of around 0.1%, taking the annual rate down to around 8.1%, with gas prices, airfares, and used car costs showing significant declines. However, the Federal Reserve's resolve in fighting inflation and reluctance to slow interest rate hikes suggests that Tuesday's data may have little effect on next week's rate decision, with the CME Group's FedWatch still indicating an 88% chance of a 75 basis point rate hike.

Key Takeaways:

  • Economists expect a month-on-month decline in consumer price pressures of around 0.1%, taking the annual rate down to around 8.1%, with gas prices down as much as 25% from their early June highs.
  • The Federal Reserve's resolve in fighting inflation and reluctance to slow interest rate hikes suggests that Tuesday's data may have little effect on next week's rate decision.
  • The CME Group's FedWatch still indicates an 88% chance of a 75 basis point rate hike, with traders pricing in the likelihood of a Fed Funds rate that could top out at 4% by early next year.
  • Investors are looking for today's August inflation data to indicate peak price pressures in the U.S. economy, thanks in part to tumbling gas prices and the unravelling of supply chain disruptions.
  • The dollar index has fallen sharply over the past week, as investors see a near-term Fed pivot while central banks in Britain, Europe, and elsewhere continue to deliver hawkish rate hike rhetoric.
  • Overseas markets have seen a lift from the dollar's overnight weakness, with the region-wide MSCI ex-Japan index gaining 0.68% and the Nikkei 225 in Tokyo rising 0.25%.
  • Oracle Corp. (ORCL) shares moved higher after posting weaker-than-expected first-quarter earnings but forecasting solid near-term revenues.
  • Peloton Interactive (PTON) shares fell 2.3% after co-founders John Foley and Hisao Kushi would leave the group as part of its broader restructuring effort.
  • Starbucks (SBUX) shares edged higher ahead of the group's much-anticipated investor day presentation.

Statistics:

  • U.S. equity futures advancing for a fifth consecutive session
  • The CME Group's FedWatch indicating an 88% chance of a 75 basis point rate hike
  • The dollar index falling 0.55% overnight to 107.734
  • 2-year Treasury note yields holding at 3.53%
  • The region-wide MSCI ex-Japan index gaining 0.68%
  • The Nikkei 225 in Tokyo rising 0.25%
  • Oracle Corp. (ORCL) shares moving higher after posting weaker-than-expected first-quarter earnings but forecasting solid near-term revenues
  • Peloton Interactive (PTON) shares falling 2.3% after co-founders John Foley and Hisao Kushi would leave the group
  • Starbucks (SBUX) shares edging higher ahead of the group's much-anticipated investor day presentation

Sources:

  • "Stocks Push Gains, Inflation, Peloton, Oracle And Starbucks In Focus - Five Things To Know" by TheStreet.com
  • Ian Shepherdson of Pantheon Macroeconomics
  • The Federal Reserve's resolve in fighting inflation and reluctance to slow interest rate hikes
  • The CME Group's FedWatch
  • Oracle Corp. (ORCL)
  • Peloton Interactive (PTON)
  • Starbucks (SBUX)

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