By Peter Bergman (MoneyAmped.com)
Wall Street appears poised to begin the day with a slight decline as investors anticipate the unveiling of the most recent inflation figures. These figures may influence predictions regarding interest rate reductions in the coming months. The upcoming earnings season is almost here, and the U.K. economy experienced a rebound in May.
Will the June CPI Data Solidify the Possibility of a Rate Cut in September?
The highly anticipated monthly U.S. consumer inflation report is set to be released later today. Analysts predict that it will reveal a decrease in inflation, potentially leading to interest rate reductions in September.
According to projections, the U.S. June headline CPI is anticipated to decrease to 3.1% on a yearly basis. Meanwhile, the core CPI is expected to remain unchanged at 0.2% month over month.
During his appearance before lawmakers on Capitol Hill, Jerome Powell, the Chair of the U.S. Federal Reserve, he expressed that the presentation of positive data would strengthen the argument for the U.S. central bank to lower interest rates.
Powell appeared before the House of Representatives for his semi-annual Congressional testimony following his discussion with the Senate Banking Committee earlier in the week.
According to CME FedWatch, the probability of the central bank implementing an easing policy at its September meeting, as indicated by Fed funds futures, stands at 73%. The inflation meeting forecasts are expected to confirm these expectations.
However, an unexpected surge could disrupt forecasts, unsettle the stock markets, and strengthen the value of the American currency.
Futures Slightly Decline Prior to Significant Inflation Data Release
US stock futures slightly declined on Thursday as they took a hiatus from reaching all-time highs. Investors are awaiting the release of crucial inflation data, which may further support the anticipation of an interest rate reduction in September.
When the Dow futures agreement was traded at 4:00 p.m. Eastern Time (08:00 GMT), it witnessed a modest loss of 22 points, equivalent to 0.1%. The S&P 500 futures were down by three points, comparable to a fall of one percent, and the Nasdaq 100 futures decreased by fifteen points, also similar to a decrease of one percent.
The expansive S&P 500 index and the technology-focused Nasdaq Composite once again concluded the day at brand-new all-time highs on Wednesday. This came after Federal Reserve Chair Jerome Powell affirmed that the central bank did not require inflation to drop below 2% in order to initiate interest rate reductions.
This raised optimism that the upcoming September meeting of the central bank will mark the beginning of a series of interest rate reductions.
The upcoming release of the consumer price index for June has garnered significant attention from investors, who are eagerly awaiting confirmation of any potential easing.
In the corporate world, Costco Wholesale’s stock (NASDAQ:COST) experienced a premarket increase of over 2% following the announcement of its first membership rate hike since 2017. Similarly, WD-40 Company (NASDAQ:WDFC) saw a premarket surge of 12% due to its impressive fiscal third-quarter report.
The Upcoming Quarter’s Earnings Season Is About to Commence
The upcoming U.S. quarterly earnings season kicks off on Friday, with reports expected from several prominent banking institutions in the country.
PepsiCo (NASDAQ:PEP) and Delta Air Lines (NYSE:DAL) are scheduled to release their earnings before the market opens on Thursday.
The impressive performance in the prior quarter has raised the bar for market expectations. Forecasts for the second quarter indicate a projected growth of 8.6% in earnings compared to the corresponding period last year, with revenues also anticipated to climb by 4.7%.
This projected increase is the most notable since the 9.9% surge witnessed in the initial quarter of 2022.
According to a note from Goldman Sachs dated June 28, analysts anticipate that S&P 500 firms will once again surpass the expectations set by consensus estimates.
Nevertheless, the extent to which earnings expectations are exceeded is expected to decrease as the consensus forecasts become more challenging compared to previous quarters.
The S&P 500 has surged 16% thus far in 2024, propelled by a select few colossal stocks positioned to capitalize on the rise of cutting-edge artificial intelligence technology.
The strategists at BofA Global Research have determined that over the first half of the year, just 24 percent of the companies that make up the S&P 500 managed to achieve a higher return than the index. Since 1986, this is the third-narrowest six-month timeframe that has ever occurred.
On the other hand, the S&P 500, which represents the average stock, has only experienced a modest 4% increase so far this year.
The UK Economy Demonstrates Robust Expansion
In May, the U.K. economy rebounded, as monthly gross domestic product rose by 0.4%. This increase surpassed expectations of 0.2% and marked an improvement from the stagnant growth in April, which was attributed to dampened consumer spending due to inclement weather.
The economy experienced growth of 0.9% during the three months ending in May, marking the highest level of expansion since the three months leading up to January 2022.
Prime Minister Keir Starmer’s new government will surely be pleased to hear this news, as the economy is slowly bouncing back from a short and mild recession that occurred at the end of last year.
Sterling has been trading at its peak levels since early March, fueled by the growth figures and indications from BoE policymakers that inflation continues to persist.
Chief Economist Huw Pill stated that the timing of a rate cut remained uncertain, which disappointed those who were expecting an easing cycle to start in August.
Crude Oil Prices Increase Following a Decline in US Stockpiles
Crude prices surged on Thursday, continuing their upward trajectory due to a decline in U.S. inventories, which has heightened anticipation of limited global supplies.
At 04:00 ET, the U.S. crude futures (WTI) saw a modest increase of 0.4% to reach $82.41 per barrel, while the Brent contract also experienced a 0.4% rise, reaching $85.39 per barrel.
Last week, U.S. crude inventories decreased significantly, with a drop of 3.4 million barrels. This exceeded expectations and indicates a substantial reduction. Additionally, gasoline stocks experienced a notable decline of 2 million barrels, surpassing the projected draw of 600,000 barrels for the U.S. Fourth of July holiday week.
The Organization of the Petroleum Exporting Countries reaffirmed its projection for robust growth in global oil demand in 2024 and the upcoming year, as stated in its monthly report.
The International Energy Agency’s monthly report will be released later in the session, and traders will be eager to see if the Paris-based organization revises its less optimistic predictions.
