U.S. Stocks May Move To The Downside Following Inflation Data

Following the strong upward move seen in the previous session, stocks are likely to move back to the downside in early trading on Thursday. The major index futures are currently pointing to a lower open for the markets, with the S&P 500 futures down by 0.4 percent.

The futures slid following the release of a highly anticipated Labor Department report showing consumer prices in the U.S. increased by slightly more than expected in the month of September.

The Labor Department said its consumer price index rose by 0.2 percent in September, matching the increase seen in August. Economists had expected consumer prices to inch up by 0.1 percent.

The report also said core consumer prices, which exclude food and energy prices, climbed by 0.3 percent for the second consecutive month. Core prices were expected to rise by 0.2 percent.

Meanwhile, the Labor Department said the annual rate of consumer price growth slowed to 2.4 percent in September from 2.5 percent in August. Economists had expected the pace of price growth to slow to 2.3 percent.

The annual rate of core consumer price growth accelerated to 3.3 percent in September from 3.2 percent in August, while economists had expected the price of growth to remain unchanged.

The bigger than expected increase by consumer prices is likely to further offset optimism the Federal Reserve will continue to aggressively lower interest rates in the coming months.

CME Group’s FedWatch Tool is currently indicating an 85.7 percent the Fed will lower rates by 25 basis points next month after slashing rates by 50 basis points last month.

Negative sentiment may also be generated in reaction to a separate Labor Department showing first-time claims for U.S. unemployment benefits increased by much more than expected in the week ended October 5th.

The report said initial jobless claims climbed to 258,000, an increase of 33,000 from the previous week’s unrevised level of 225,000. Economists had expected jobless claims to edge up to 230,000.

With the much bigger than expected increase, jobless claims reached their highest level since hitting a matching figure in the week ended August 5th, 2023.

U.S. stocks started on a somewhat flat note on Wednesday but gained in strength as the day progressed, as investors assessed the minutes of the Federal Reserve’s most recent policy meeting and looked ahead to the nation’s consumer price and producer price inflation data for more clarity on interest rate trajectory.

The major averages all closed on a buoyant note, with the Dow and S&P 500 moving on to fresh record highs. The Dow ended with a gain of 431.63 points or 1.0 percent at 42,512.00. The S&P 500 closed up 40.91 points or 0.7 percent at 5,792.04, while the Nasdaq settled higher by 108.70 points or 0.6 percent to 18,291.62.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index rose by 0.3 percent, while China’s Shanghai Composite Index jumped by 1.3 percent and Hong Kong’s Hang Seng Index surged by 3.0 percent.

Meanwhile, the major European markets have moved slightly lower on the day. While the French CAC 40 Index is down by 0.1 percent, the U.K.’s FTSE 100 Index and the German DAX Index are just below the unchanged line.

In commodities trading, crude oil futures are jumping $0.94 to $74.18 a barrel after falling $0.33 to $73.24 a barrel on Wednesday. Meanwhile, after slipping $9.40 to $2,626 an ounce in the previous session, gold futures are climbing $10.90 to $2,636.90 an ounce.

On the currency front, the U.S. dollar is trading at 148.56 yen versus the 149.31 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0942 compared to yesterday’s $1.0939.

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