LDN - Business

Futures rise after selloff, all eyes on CPI data

[August 09, 2023] By Bansari Mayur Kamdar and Johann M Cherian

(Reuters) -U.S. stock index futures edged higher on Wednesday following a risk-off session triggered by a Moody's downgrade of some banks, with investors looking ahead to a key inflation report this week after mostly dovish comments from Federal Reserve officials.

The Consumer Price Index (CPI) for July, due on Thursday, is expected to show a slight year-over-year acceleration. On a month-to-month basis, consumer prices are seen increasing 0.2%, the same rate as in June.

Philadelphia Fed President Patrick Harker said on Tuesday the U.S. central bank may be at the stage where it can leave interest rates unchanged, barring any abrupt change in the direction of recent economic data.

However, some central bank officials are still leaning the other way, with Fed Governor Michelle Bowman on Monday saying the combination of still-elevated inflation and continued economic growth meant further rate increases are likely.

Traders expect an 86.5% chance of a 25-basis point rate hike at the Fed's next policy meeting in September. [FEDWATCH]

Wall Street's main indexes ended the previous session lower in a broad selloff after the downgrading of several small and mid-sized banks by credit rating agency Moody's reignited fears about the health of U.S. lenders and the economy.

Big banks edged higher on Wednesday before the bell, with Bank of America and Citigroup up 0.2% and 0.3%, respectively.

Adding to concerns about the global economy, China's consumer sector fell into deflation and factory-gate prices extended declines in July, as the world's second-largest economy struggled to revive demand.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 7, 2023. REUTERS/Brendan McDermid

"Chinese deflation has been the proverbial elephant in the room when it comes to recent tightening measures from the Federal Reserve, the ECB, and Bank of England," Michael Hewson, chief market analyst at CMC Markets, said.

"How many more rate hikes can we expect in the coming months when there is a clear deflationary impulse coming from Asia, and where is the tipping point when it comes to the risk of overtightening."

At 6:57 a.m. ET, Dow e-minis were up 44 points, or 0.12%, S&P 500 e-minis were up 9 points, or 0.20%, and Nasdaq 100 e-minis were up 31.5 points, or 0.21%.

Casino owner Penn Entertainment's shares jumped 14% in premarket trading on a $2 billion deal with Walt Disney's ESPN to launch a sports betting business.

Walt Disney's shares rose 0.8% ahead of its quarterly results due after markets close.

Rivian Automotive gained 1.5% on raising its full-year production forecast.

Lyft signaled it would double down on competitive pricing to catch up with rival Uber, taking the shine off its strong earnings forecast and sending the company's shares down 9.4%.

Markets are nearing the end of a better-than-expected earnings season.

Of the 443 S&P 500 companies that have reported earnings as of Tuesday, 78.6% beat analyst expectations, according to Refinitiv data.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Shounak Dasgupta)

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