Wednesday August 11th

11-08-2021

U.S. stock futures bounce higher after July CPI report

U.S. stock index futures rose slightly on Wednesday after a core reading of inflation came in lighter than expected. Futures contracts tied to the Dow Jones Industrial Average gained about 60 points. S&P 500 futures rose 0.1% and Nasdaq 100 futures gained 0.12%. July’s Consumer Price Index was released on Wednesday morning showing prices rose 5.4% since last year, compared to expectations of 5.3%, according to economists surveyed by Dow Jones. The government said CPI increased 0.5% in July on a seasonally adjusted basis. Excluding energy and food, CPI rose by 0.3% last month, shy of economist expectations of a 0.4% increase. In June prices jumped 0.9%, or 5.4% on an annual basis, which was the biggest monthly increase since August 2008. Core CPI rose by 0.4% last month, compared with the 0.9% increase in core in June. June’s core year-over-year increase of 4.5% was the highest since September 1991. The 10-year Treasury yield turned low following the report, trading around 1.344%. Oil prices dropped Wednesday after the White House called on OPEC and its allies to increase oil production to support the global recovery from the pandemic. Futures contracts for West Texas Intermediate crude fell by more than 1% to about $67.44 per barrel. European benchmark Brent crude also slipped by more than 1% to about $69.85 per barrel. Shares of Southwest Airlines ticked nearly 2% lower in premarket trading after lowering its third quarter operating revenue guidance, citing the Delta variant. American Airlines and United Airlines also slipped in the premarket. On Tuesday, the Dow and S&P 500 closed at record highs following the Senate passing the $1 trillion infrastructure bill. The legislation earmarks $550 billion in new spending for areas including transportation and the electric grid. The Nasdaq Composite slid 0.49% on Tuesday, registering its second negative session in the last three. The dip came as treasury yields advanced, weighing on growth-oriented areas of the market. The march to record highs for stocks comes despite Covid case numbers rising in the U.S. and around the world. “Widespread vaccine distribution and distancing measures have helped limit the variant’s impact, but we could still see some drag on economic growth as some restrictions are reintroduced and consumers potentially become more cautious,” said Barry Gilbert, asset allocation strategist at LPL Financial. “While we may see an increase in market volatility due to the Delta variant, we believe the S&P 500 is still likely to see more gains through the end of the year,” he added. Earnings season continues on Wednesday with Wendy’s and Canada Goose among the names set to report prior to the opening bell. Lordstown Motors, eBay and Bumble are on deck for after-hour closes. Through Friday, 87% of the S&P 500 companies that reported quarterly results have beat earnings estimates. The same percentage of companies beat revenue estimates during that timeframe. “There’s been a lot to take in these last few weeks; major earnings, a hawkish Fed and some knockout economic readings,” said Craig Erlam, senior market analyst at Oanda. “Everything it seems is now pointing towards the Fed tapering its asset purchases in the coming months, with delta the only things potentially standing in its way as it spreads across the US (and many other countries).” Major Asia-Pacific markets closed mixed on Wednesday, while shares of China’s most indebted property developer Evergrande and some of its units soared. Chinese markets were muted. The Shanghai composite closed just above the flatline to 3,532.62, while the Shenzhen component was down 0.24% to 15,021.17. Hong Kong’s Hang Seng index rose 0.21% in the final hour of trade. Japan’s Nikkei 225 climbed 0.65% to close at 28,070.51, while the Topix jumped nearly 1% to 1,954.08. South Korea’s Kospi dipped 0.7% to 3,220.62. Meanwhile, Singapore’s Straits Times index dipped 0.82% in the afternoon. Gold rose on Wednesday as concerns over the economic impact of the Delta coronavirus variant spurred some safe haven buying, though gains were capped by bets on early tapering by the U.S. Federal Reserve and a firm dollar. Spot gold rose 0.5% to $1,737.95 per ounce by 7:47 a.m. ET, recovering some ground after four straight sessions of declines. U.S. gold futures gained 0.4% to $1,738.30.