The mood on Wall Street relays cautious optimism as stock futures traded modestly higher ahead of the open on Tuesday. The October inflation data could largely determine the day’s trading direction, given the Federal Reserve’s fixation on prices notwithstanding their recent two pause decisions. The headline number is expected to slow both year-over-year and month-over-month. An in-line to tamer number could reignite the rally that has lost steam.
The Dow could receive support from a rally in the shares of Home Depot, Inc. (NYSE:HD), which reported a third-quarter beat. Bond yields edged lower ahead of the inflation data.
Cues From Monday’s Trading:
Stocks closed mixed on Monday amid nervy trading as traders mulled over the impact of Moody’s U.S. rating outlook cut and looked ahead to some key data releases scheduled for the week.
The major averages opened lower but cut their losses through the morning session. The major indices moved roughly sideways in the afternoon, moving in a narrow range around the unchanged line before closing mixed.
The Dow Industrials ended higher, thanks to stock-specific strength, while the Nasdaq Composite and the S&P 500 Index finished modestly lower.
Energy and healthcare stocks were among the best-performing S&P 500 sectors, while real estate, utility and IT stocks moved notably lower.
An analyst at LPL Financial weighed in on the multiple near-term risks the market is left to contend with. “As financial markets attempt to assimilate a broad range of key economic reports, particularly the CPI, retail sales and earnings reports, the clock is ticking towards a potential government shutdown,” said Quincy Krosby, LPL’s chief global strategist.
“This week’s onslaught of fundamental inflation data, in addition to another week of non-stop Fed-speak, should either awaken the broader S&P 500, or the Mega 7 alone,” he said. By Mega 7, the analyst refers to the “Magnificent seven” of the biggest mega-cap stocks. He said that these seven mega-cap tech names have remained resilient in the high-interest rate environment due to their collective appeal as a decidedly proactive defensive allocation.
“Their rock-bottom balance sheets, coupled with their typically positive earnings outlook underscored by global market strength, propels cash inflows in optimistic times and increasingly during difficult times,” Krosby said.
Upcoming Economic Data:
The Labor Department will release its consumer price inflation report for October at 8:30 a.m. ET. Economists, on average, expect consumer prices to have seen a 0.1% month-over-month increase in October, slower than September’s 0.4% climb. The core consumer price inflation rate is expected to remain unchanged at 0.3%.
The annual rate of consumer and core consumer prices may have been at 3.3% and 4.1%, respectively. This compares to the September rates of 3.7% and 4.1%, respectively.
Fed Vice Chair for Supervision Michael Barr is due to testify to a Senate panel at 10 a.m. ET.
Chicago Fed President Austan Goolsbee is scheduled to speak at 12:45 p.m. ET.
Stocks In Focus:
- Fisker, Inc. (NYSE:FSR) slumped over 13.5% in premarket trading after the electric vehicle maker reported a wider-than-expected third-quarter loss and weak deliveries.
- Home Depot, Inc. (NYSE:HD) shares rose over 1.70% after the home improvement retailer reported third-quarter results that beat expectations. The company narrowed its guidance ranges for 2023.
- Canadian Solar Inc. (NASDAQ:CSIQ), Tencent Music Entertainment Group (NYSE:TME), and Vipshop Holdings Limited (NYSE:VIPS) are among the other notable companies reporting their earnings ahead of the market open.
Commodities, Bonds, Other Global Equity Markets:
Crude oil futures edged up 0.06% to $78.31 in early European session on Tuesday following the 1.41% jump in the previous session.
On Tuesday, the benchmark 10-year Treasury note fell 0.014 percentage points to 4.618%.
The Asian markets closed Tuesday’s session mostly higher despite the lackluster close on Wall Street overnight. The gains were led by the South Korean, Australian, and New Zealand markets, while the Hong Kong and Singaporean markets settled lower. The Indian market was closed on account of a public holiday.
Their European counterparts traded on a mixed note in late-morning trading, with the German and French markets advancing, while the U.K. market was seen slipping after data showed that U.K. wage growth remained strong despite the slowing in the July to September period.
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