US Stock Futures Flat After Key Consumer Prices Report

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Key Takeaways

• Stock futures float mixed near the flat line ahead of the regular session on Thursday
• US inflation remains at 5.4%, same pace as in June, but core CPI moves lower to 0.3%

US Stock Futures Flat

Stock index futures are trading little changed in pre-market activity on Thursday. The quiet futures session followed a highly-anticipated consumer price report which, rather surprisingly, helped define the upside momentum in stocks. Dow futures are higher by about 10 points, while S&P500 futures remain virtually unchanged. Nasdaq futures are lower by roughly 20 points ahead of the opening bell in New York today.

In fact, July’s inflation reading, according to data from the US Labor Department, arrived at 5.4%, the same pace as in June. While the figure remained high, core inflation, however, rose by 0.3% in July, less than the 0.4% expected on a monthly basis. Year on year, core inflation rose 4.3%. The core consumer price index (CPI) excludes foods and energy prices which are oftentimes volatile.

In signs of easing inflation pressures, the latest inflation numbers were lower than June’s core inflation increase by 0.9% on a monthly basis, and a 4.5% annual increase.

The pause in inflation growth fueled investors’ hopes that the peak of higher prices could have already been materialized. As price pressures weakened, relative to expectations, investors piled anew into economically sensitive shares, leading the blue-chip Dow Jones Industrial Average to a new all-time high.

The 30-stock benchmark index added over 220 points in a Wednesday rally, setting its 32^nd record close after it pushed to an all-time high the previous day. The Dow Jones added 220.30 points, or 0.62%, to close at 35,484.97. The S&P500 also set a back-to-back record closing high, finishing Wednesday’s action up by 0.25%, or 10.95 points, to 4,447.70.

Digital Currencies Retreat from Recent Highs

The Nasdaq Composite slipped modestly by 22.95 points, or 0.16%, to end the day at 14,765.14. The tech-centered stock average was pressured by a weak big tech performance. Shares in Google parent Alphabet lost roughly 0.4%, while Amazon stock declined about 0.9%. Tesla and Facebook were each down around 0.3%.

While the slowdown in the pace of inflation visible in the latest report is easing investors’ concerns, analysts point out that this does not necessarily mean the inflation fever is breaking. The fresh inflation print arrived amid heightened Delta virus fears and data that its fast spread has begun to dent economic activity in certain parts of the world.

The Federal Reserve, in the meantime, is forecasting price increases to slow as the economy progresses. Fed Chairman Jerome Powell has reiterated policymakers viewed the current spike in inflation as “transitory” as they projected prices would come down once business reopenings subside.

On that note, investors are speculating how quickly the US central bank will begin reducing its pandemic-era stimulus injections. The market, as reassured by Mr. Powell, should be informed as early as possible about a potential tapering of the asset purchases so that the transition process would avoid the so-called “taper tantrum”.

In Europe today, major bourses remain elevated as investors maintain their strong positioning across the board. Thus, most major indexes were up in the early trading hours of the European session, with the region-wide Stoxx 600 is floating near its fresh record set Wednesday.

Digital currencies today have retreated from their recent highs. Bitcoin and ether are down about 2% each, trading at $45,200 and $3,150, respectively. On Wednesday, the entire cryptocurrency market surged above $2tn in market valuation, boosted by a strong risk appetite and improved prospects for growth.