As we approach today’s opening bell, stock futures have been hovering above and below the unchanged mark, suggesting an uncertain start for the major U.S. stock indexes. In overnight trading, markets in Asia were mixed, and the major European indexes are trading in positive territory. Elsewhere, oil prices have given up some ground, with West Texas Intermediate down about 1.4%, to around $79.00 a barrel.
Although earnings season is winding down, the market’s attention has largely shifted elsewhere this week. Namely, this morning’s consumer price index (CPI) provided the latest report card on how the Federal Reserve is coming along with its attempts to tame inflation. Specifically, the Labor Department’s January CPI index was up 0.5%, or 6.4% on an annualized basis. Although this was slightly higher than the consensus was looking for, it marked the seventh-consecutive month of deceleration. For comparative purposes, the annualized rate was running at 9.1% last June. Theoretically, at least, this means the central bank is one step closer to putting an end to its stretch of interest-rate increases. However, it will likely take several more positive readings for the lead bank to pivot, and revert to rate cuts. Based on comments by Fed officials, that scenario is not likely to occur until sometime next year.
Indeed, the Federal Reserve is walking a very fine line, whereby raising rates too high for too long risks throwing the economy into a recession. Moreover, given the lagging effect as rate increases work their way through to businesses and consumers, central banks around the world won’t immediately know when they’ve gone too far. The hope, therefore, is that a “soft landing” can be effected, avoiding a significant economic downturn.
Also on the economic docket for this week we have retail sales and industrial production figures for January, as well as the National Association of Homebuilders index for February due out tomorrow morning. These will be followed on Thursday by the Producer Price Index (PPI) for January, as well as last month’s numbers for building permits and housing starts, and then the latest reading for the leading economic indicators on Friday.
Altogether, stocks started the week to the upside, with the Dow Jones Industrials advancing 376 points or 1.1%, the S&P 500 was up 46 points (1.1%), and the tech-heavy NASDAQ posted the largest gains, rising 173 points, or 1.5%. – Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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