Nasdaq, S&P 500 Futures Turn Lower As Traders Digest Inflation Data That Eased In Line With Expectations

Trading in the index futures suggests a negative start on Thursday, as traders digest the December consumer price inflation data that came in line with expectations. The strong gains in the run-up to the inflation data are potentially weighing down on sentiment.

What Happened: On Wednesday, the major averages advanced notably, as the market began discounting tamer inflation data and by extension slower interest rate hikes. Stocks gap-opened higher and saw a consolidation move till late morning trading. Subsequently, the indices launched into a strong rally before closing sharply higher.

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With the gains, the three averages settled at fresh one-month highs. The buying was broad-based, with all sectors participating in the rally. Real estate, consumer discretionary and technology stocks were among the best performers.

The buoyancy seen at the start of the year reflects investor hopes for a Fed pivot, fund manager Louis Navellier said. “Investors are encouraged by a strong start in January which historically has led to strong years,” he said.

Despite Fed speakers’ insistence that the fed fund rate will go up to 5% and remain there until inflation hits the central bank’s 2% target, the market seems to be hoping for a Fed pivot in 2023, Navellier said. But he cautioned that even if the Fed softens its rhetoric, the upcoming earnings season and guidance will likely be the dominating influence on markets.

Here’s a peek into index futures trading:

In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust SPY rose 0.03%, to $395.65, while the Invesco QQQ Trust QQQ edged down 0.04%, to $277.44, according to Benzinga Pro data.

On the economic front, Federal Open Market Committee member and Philadelphia Fed President Patrick Harper is scheduled to speak at 7:30 a.m. EST.

The Bureau of Labor Statistics released the inflation report for December, showing a 0.1% month-over-month drop in the consumer price index following a 0.1% increase in November. The core CPI climbed 0.3%. Both readings were in line with expectations.

On a year-over-year basis, the CPI was up 6.5%, slower than the 7.1% increase in November and in line with expectations. The annual rate of the core inflation came in at 5.7% vs. 6% in November, also in line with expectations.

Around the same time, the Labor Department will release the customary jobless claims report. The number of individuals filing for unemployment benefits is estimated at 215,000 in the week ended Jan. 6, faster than the 204,000 reported for the previous week.

The Treasury will auction 4-week and 8-week bills at 11:30 a.m. EST. The federal agency will auction 30-year bonds at 1 p.m. EST.

Stocks In Focus:

• Shares of home builder KB Home KBH fell over 2.6% in premarket trading after its fourth-quarter results trailed expectations.
• Taiwan Semiconductor Manufacturing Company Limited TSM gained about 2% despite issuing sub-par guidance for the first quarter. The company’s fourth-quarter earnings per share beat estimates.
• Japanese banks Mitsubishi UFJ Financial Group Inc. MUFG and Sumitomo Mitsui Financial Group Inc. SMFG were solidly higher.
• Walt Disney Company DIS rose over 1% after a Wall Street Journal report said activist investor Nelson Peltz is planning a proxy fight for a board seat.
• Tesla Inc. TSLA fell about 1.5%, reversing part of Wednesday’s gain.

Commodities, Other Global Markets:

Crude oil futures were higher for a second straight session and the benchmark 10-year Treasury note yield slipped further to 3.543%.

The Asia-Pacific markets mostly advanced, led by the Australian market, as traders reacted to the positive close on Wall Street overnight. The mood, however, was one of caution ahead of the U.S. inflation data.

European stocks are advancing moderately in late-morning trading.

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