US futures rise after weaker-than-expected inflation data

US futures rise after weaker-than-expected inflation data

U.S. stock and government bond futures rose sharply on Wednesday after weaker-than-expected inflation data from the world’s largest economy.

Consumer price index data released on Wednesday showed that prices in the US rose 8.5% year-on-year in July, below the 8.7% rise expected by economists.

Prices were flat on a month-over-month basis, below the 0.2% increase expected.

Futures tracking the blue-chip S&P 500 gained 1.7% after the release, while the tech-heavy Nasdaq 100 gained 2.5%.

In U.S. government bond markets, the yield on the 10-year U.S. Treasury note, which tracks inflation and growth expectations, fell 0.1 percent to 2.7 percent. The yield on the two-year note, which moves with interest rate expectations, fell 0.2% to 3.1%.

In Europe, the Stoxx 600 gained 0.9% and Germany’s Dax gained 1% after losses in the previous session.

The statement was “the only significant economic data of the week,” Adam Cole, chief currency strategist at RBC Capital Markets, wrote in a note on Tuesday morning.

The stronger-than-expected data will ease investor concerns that the Federal Reserve will raise rates by 0.75 percentage points at its next policy meeting in June.

The inflation benchmark hit 9.1% in June, the highest level in 40 years, prompting the US central bank to raise interest rates consecutively by 0.75 percentage points.

Markets are pricing in the possibility of another 0.75 percentage point hike at the Fed’s next policy meeting in September, with 65 percent of investors still pricing them.

Core inflation, a measure of price growth that strips out volatile categories such as energy and food, also came in below expectations, staying at the 5.9% level it reached in June and much below the peak of 6.5% in March.

That came after the Nasdaq Composite fell 1.2 percent on Tuesday as a warning from chipmaker Micron Technology about slowing consumer demand fueled fears over the outlook for the sector and economic growth. The S&P 500 fell 0.4%, marking its fourth straight daily decline.

However, the S&P 500 is up 12 percent since mid-June, prompting some investors to be optimistic.

“People are ignoring the good news,” said Patrick Spencer, Baird’s vice president of equities. “I think this could be a new bull market rather than a bear market rally. The Fed will pivot eventually, the rate hikes will have to slow down . . . if inflation is below expectations, the market will rise sharply “.

Oil prices fell on Wednesday, with international benchmark Brent crude falling 1.8% to trade at $94.56 a barrel and US benchmark West Texas Intermediate down 1.8% to $88.9

Earlier on Wednesday, overnight Asian indexes were dragged down by falling tech stocks, with Hong Kong’s Hang Seng index falling 2.5 percent. China’s benchmark CSI 300 of shares traded in Shanghai and Shenzhen fell 1.2%. Japan’s Topix closed down 0.2 percent.


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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!