Tamer-Than-Expected Inflation Data May Lead To Extended Rebound On Wall Street

(RTTNews) - The major U.S. index futures are currently pointing to a slightly higher open on Friday, with stocks likely to extend the significant rebound seen in the previous session.

The futures turned positive following the release of a highly anticipated Commerce Department report showing consumer price growth in the U.S. slowed by more than expected in the month of November.

The report said the annual rate of consumer price growth decelerated to 2.6 percent in November from a downwardly revised 2.9 percent in October.

Economists had expected the pace of price growth to slow to 2.8 percent from the 3.0 percent originally reported for the previous month.

The annual rate of growth by core consumer prices, which exclude food and energy prices, also slowed to 3.2 percent in November from a downwardly revised 3.4 percent in October.

Economists had expected core consumer price growth to decelerate to 3.3 percent from the 3.5 percent originally reported for the previous month.

The readings on inflation, which are said to be preferred by the Federal Reserve, were include in the Commerce Department's report on personal income and spending.

The bigger than expected slowdown in consumer price growth is likely to add to optimism the Fed is poised to pivot to cutting interest rates early next year.

Meanwhile, a steep drop by shares of Nike (NKE) may weigh on the Dow, with the athletic apparel and footwear giant plunging by 11.5 percent in pre-market trading.

The nosedive by Nike comes after the company lowered its revenue outlook and unveiled plans to cut $2 billion in costs over the next three years.

Following the sharp pullback seen late in Wednesday's session, stocks showed a strong move back to the upside during trading on Thursday. The major averages all moved notably higher, largely offsetting Wednesday's steep losses.

The major averages saw further upside going into the close, reaching new highs for the session. The Dow advanced 322.35 points or 0.9 percent to 37,404.35, the Nasdaq surged 185.92 points or 1.3 percent to 14,963.84 and the S&P 500 jumped 48.40 points or 1.0 percent to 4,746.75.

The rebound on Wall Street came as some traders saw the sharp pullback seen late in Wednesday's session as a buying opportunity amid expectations the markets will see further upside.

Positive sentiment was also generated in reaction to revised Commerce Department data showing consumer prices increased by less than previously estimated in the third quarter.

The Commerce Department said the surge in consumer prices in the third quarter was downwardly revised to 2.6 percent from 2.8 percent.

The increase in core consumer prices, which exclude food and energy prices, was also downwardly revised to 2.0 percent from 2.3 percent.

The revised inflation data was included in a report showing the spike in gross domestic product in the third quarter was downwardly revised to 4.9 percent from 5.2 percent. Economists had expected the pace of GDP growth to be unrevised.

"While third quarter GDP was revised slightly lower, the bigger news was the downward revisions to both headline and core PCE inflation, both of which showed faster progress toward the Fed's 2% target," said Michael Pearce, Lead US Economist at Oxford Economics.

He added, "That helps vindicate the Fed's dovish shift in messaging, and, if sustained, opens the door to earlier rate cuts than our current September forecast."

A separate report released by the Labor Department on Thursday showed a slight uptick by initial jobless claims in the U.S. in the week ended December 16th.

The Labor Department said first-time claims for U.S. unemployment benefits crept up to 205,000, an increase of 2,000 from the previous week's revised level of 203,000.

Economists had expected jobless claims to rise to 215,000 from the 202,000 originally reported for the previous week.

The Federal Reserve Bank of Philadelphia also released a report showing regional manufacturing activity unexpectedly contracted at an accelerated rate in the month of December.

Semiconductor stocks saw substantial strength on the day, resulting in a 2.8 percent surge by the Philadelphia Semiconductor Index.

Micron Technology (MU) led sector higher, spiking by 8.6 percent after reporting better than expected fiscal first quarter results and providing upbeat fiscal second quarter guidance.

Significant strength was also visible among airline stocks, with the NYSE Arca Airline Index soaring by 2.7 percent to its best closing level in over four months.

Computer hardware, networking and steel stocks also saw considerable strength, moving back to the upside along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are climbing $0.67 to $74.56 a barrel after slipping $0.33 to $73.89 a barrel on Thursday. Meanwhile, after inching up $3.60 to $2,051.30 an ounce in the previous session, gold futures are jumping $21 to $2,072.30 an ounce.

On the currency front, the U.S. dollar is trading at 142.07 yen versus the 142.12 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1021 compared to yesterday's $1.1011.

Asia

Asian stocks ended on a muted note Friday as investors awaited the release of the Fed's preferred inflation gauge later in the day that could offer clues into when U.S. rate cuts can be expected in 2024.

The dollar lingered near a four-month low and bond yields ticked lower after two-year U.S. Treasury yields fell 2 basis overnight after third-quarter U.S. core PCE inflation was revised down to 2 percent.

Gold climbed to its highest level in nearly three weeks as markets priced in more than 150 basis points of rate cuts in 2024.

Oil was set for another weekly gain as concerns about the security of Red Sea shipping outweighed doubts surrounding OPEC's efforts to limit global supply.

Chinese shares edged lower as internet stocks tumbled after regulators announced a wide range of rules aimed at curbing spending and rewards that encourage video games.

The benchmark Shanghai Composite Index slipped 0.1 percent to 2,914.78, while Hong Kong's Hang Seng Index slumped 1.7 percent to 16,340.41. Netease shares plunged nearly 25 percent and Tencent Holdings lost 12.5 percent.

Japanese shares ended on a flat note, with banks and shipping stocks gaining. Toyota Motor shed 0.9 percent after announcing it will recall 1.12 million Toyota and Lexus vehicles because of a potential faulty sensor.

The Nikkei 225 Index finished marginally higher at 33,169.05, while the broader Topix Index closed 0.5 percent higher at 2,336.43.

Official data revealed earlier in the day that Japan's headline inflation rate slowed to 2.8 percent year-on-year in November from 3.3 percent in the previous month. It was the slowest pace of inflation since July 2022.

Seoul stocks ended on a flat note, with the Kospi closing little changed with a negative bias at 2,599.51 after late-day selling. Battery and bio-related stocks led losses.

Australian markets also ended on a flat note but posted their fourth straight weekly gain. Financials declines, offsetting gains in the mining and energy sectors.

Core Lithium shares slumped 21 percent after reports that the miner is looking at curtailing production in response to weak lithium prices.

Across the Tasman, New Zealand's benchmark S&P/NZX 50 Index ended marginally higher at 11,634.43 in holiday-shortened trading.

Europe

European stocks are roughly flat on Friday as investors monitor developments around the Red Sea and digest the latest U.S. inflation data.

The British pound strengthened against other major currencies after data showed U.K. retail sales rose more than expected in November.

Data from the Office for National Statistics showed that British retail sales advanced 1.3 percent month-on-month in November following a revised nil growth in October.

Separate data showed the U.K. economy contracted in the third quarter due to weakness in the service sector.

Gross domestic product shrank 0.1 percent sequentially in the third quarter, which was revised down from the flat growth estimated initially.

Meanwhile, the U.K. current account deficit narrowed to GBP 17.18 billion in the third quarter from GBP 23.96 billion in the second quarter.

While the U.K.'s FTSE 100 Index is just above the unchanged line, the French CAC 40 Index and the German DAX Index are both up by 0.1 percent.

Shipping giant Hapag-Lloyd has edged slightly higher after saying that it would reroute 25 ships by the end of the year to avoid the Suez Canal and the Red Sea.

Klockner & Co, a German steel and metal distributing company, has advanced after it announced plans to sell parts of its European commodity distribution business.

EnQuest has soared. The independent energy company has agreed to sell 15 percent interest each in the Bressay field and the EnQuest Producer floating production, storage and offloading vessel (FPSO), both located in the UK North Sea to RockRose UKCS 10 Ltd, a unit of Viaro Energy.

Vinci has also risen. The engineering and construction company announced that its subsidiary Seymour Whyte has received a contract to improve Cressbrook Dam, in the Toowoomba region, around 100 km from Brisbane.

Meanwhile, Adidas and Puma have tumbled after U.S. peer Nike lowered its revenue outlook and unveiled plans to cut $2 billion (€1.8 billion) in costs over the next three years.

Air France-KLM has also fallen. The airline said it would consider whether to appeal against a European court annulment of European Union approvals of France's state-aid measures during the Covid-19 pandemic.

U.S. Economic Reports

A highly anticipated report released by the Commerce Department on Friday showed consumer price growth in the U.S. slowed by more than expected in the month of November.

The report said the annual rate of consumer price growth decelerated to 2.6 percent in November from a downwardly revised 2.9 percent in October.

Economists had expected the pace of price growth to slow to 2.8 percent from the 3.0 percent originally reported for the previous month.

The annual rate of growth by core consumer prices, which exclude food and energy prices, also slowed to 3.2 percent in November from a downwardly revised 3.4 percent in October.

Economists had expected core consumer price growth to decelerate to 3.3 percent from the 3.5 percent originally reported for the previous month.

The readings on inflation, which are said to be preferred by the Federal Reserve, were include in the Commerce Department's report on personal income and spending.

The Commerce Department released a separate report showing new orders for U.S. manufactured durable goods surged by much more than expected in the month of November.

The report said durable goods orders spiked by 5.4 percent in November after tumbling by a revised 5.1 percent in October.

Economists had expected durable goods orders to jump by 2.2 percent compared to the 5.4 percent nosedive that had been reported for the previous month.

Excluding a rebound in orders for transportation equipment, durable goods orders climbed by 0.5 percent in November after falling by 0.3 percent in October. Ex-transportation orders were expected to inch up by 0.1 percent.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of November. Economists expect new home sales to climb to an annual rate of 685,000 in November after plunging to a rate of 679,000 in October.

The University of Michigan is also due to release its revised reading on consumer sentiment in the month of December at 10 am ET. The consumer sentiment index for December is expected to be unrevised from the preliminary reading of 69.4, which was up from 61.3 in November.