Dow Inches Higher With Inflation Data, Fed Minutes, Earnings Ahead—and What Else Is Happening in the Stock Market Today

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Investors will be able to scrutinize discussions by Federal Reserve officials such as Chair Jerome Powell from the September FOMC meeting.

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The stock market was heading cautiously higher Wednesday, as investors turned to catalysts in the day ahead in the form of inflation data, minutes from the latest meeting of the Federal Reserve’s monetary policy committee, and the first wave of U.S. corporate earnings.

Futures for the Dow Jones Industrial Average indicated an open 75 points higher, after the index slipped 117 points Tuesday to close at 34,378. Futures for the S&P 500 and Nasdaq signaled a similar start.

The concerns hanging over markets in recent weeks have centered on inflation, the future of central bank stimulus, and how supply-chain pressures will impact company profits. Wednesday will see updates on all three. 

Economic data in the form of the U.S. consumer-price index (CPI) for September are due, alongside the minutes from last month’s meeting of the Federal Open Market Committee, the Fed’s monetary policy-making body. 

Investors will keenly watch for changes in inflation, which has come into the spotlight recently amid a surge in energy prices and is at the center of a debate over whether rising costs are transitory or more long-lasting. Treasury Secretary Janet Yellen reaffirmed her belief that elevated inflation in the U.S. will prove transitory, even as it may take months for high prices to return to normal, in an interview with CBS Tuesday.

Inflation data will be scrutinized alongside the discussions by central bank officials over how and when the Fed should begin slowing, or tapering, its program of monthly asset purchases, which add liquidity to markets. Most expect the Fed to begin tapering its bond buying program in November.

“It’s the last CPI number the Fed will have ahead of their next policy decision just three weeks from now, where investors are awaiting a potential announcement on tapering asset purchases,” noted Jim Reid, a strategist at Deutsche Bank.

Moreover, the corporate earnings season gets under way in earnest Wednesday, with JPMorgan (ticker: JPM), Delta Air Lines (DAL), and BlackRock (BLK) in the first wave of companies reporting results. 

“Critical this time around, will be the Q4 and 2022 outlooks by corporate heavyweights. Most especially is whether their outlooks are pared back as supply-chain woes, higher inflation and funding costs, higher energy etc., take their toll,” said Jeffrey Halley, an analyst at broker Oanda.

“With equities so heavily priced towards a linear postpandemic recovery, and with the Fed looking increasingly likely to withdraw the easy money punch bowl, we can expect a lot more two-way volatility in equity markets in Q4,” Halley added.

Adding buoyancy to market sentiment in the U.S. was a bill passed by the House of Representatives temporarily increasing the government’s borrowing limit and averting a default on U.S. debt. The bill now goes to President Joe Biden.

Overseas, the pan-European Stoxx 600 was 0.4% higher. In Asia, Hong Kong’s Hang Seng Index fell 1.4% following mixed trade data out of China.

“While the August trade numbers for China were slightly better than expected, despite disruption at Chinese ports and the various lockdown restrictions that affected a lot of the country at the time, it’s still clear that demand in the Chinese economy has been slowing in recent months,” said Michael Hewson, an analyst at broker CMC Markets.

Here are six stocks on the move Wednesday

SAP (SAP) rose 4.9% in Frankfurt, after the software company raised its outlook for the third time this year—now expecting revenue in its critical cloud division to grow by 16% to 19% this year. The U.S.-listed shares were 1% higher in premarket trading.

Volkswagen (VOW3.Germany) rose 3.6% in Frankfurt. The automobile maker and a leader in electric vehicles has delayed a decision on the location of its gigafactory, and there were reports that it was considering spinning off its battery cell and charging unit.

LVMH (MC.France) rose 1.9% in Paris, after the luxury-goods giant posted third-quarter revenue ahead of expectations, with organic sales growth across the group up 20%, ahead of consensus.

Barratt Developments (BDEV.U.K.), one of the U.K.’s largest residential property developers, rose 5.2% in London after giving an update ahead of its annual general meeting. The house builder said it saw “continued strength in customer demand” over the summer.

JustEat Takeaway.com (JET.U.K.), the food delivery company, fell 3% in London after reporting order growth in the third quarter of 25%, short of expectations of closer to 35%.

Apple (AAPL) fell 0.8% in the U.S. premarket, after a report Tuesday that it faced parts shortages for the iPhone.

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