The CPI is stable for the month and stocks appreciate it
Stock futures rose and bond yields fell after the highly anticipated consumer price report for July came in much better than expected.
Prices rose 8.5% in July on an annual basis, a pace that is slowing compared to June. Month-over-month inflation remained stable, with energy prices down 4.6% overall and gasoline prices down 7.7%. This offset a 1.1% monthly increase in food prices and a 0.5% increase in housing costs. Economists polled by Dow Jones expected the headline CPI to rise 8.7% on an annual basis and 0.2% per month.
Excluding volatile food and energy prices, the so-called core CPI rose 5.9% per year and 0.3% per month, against estimates of 6.1% and 0.5% respectively. %.
—John Melloy, Jeff Cox
Futures jump after CPI report
Investors cheered a colder-than-expected inflation report as Dow futures jumped 400 points. Nasdaq 100 futures gained more than 2%, meaning the tech-heavy Nasdaq Composite could erase losses from Tuesday when market options.
In the bond market, Treasury yields fell after the report.
Futures up ahead of CPI report
Shortly before the CPI report, futures rallied on their morning gains.
Dow Jones Industrial Average futures rose 101 points, or 0.3%. S&P 500 futures gained 0.4% and Nasdaq 100 futures climbed 0.5%.
Inverted yield curve will ‘bend’, says Novogratz
Galaxy Digital CEO Michael Novogratz said on “Squawk Box” that he looks to the Treasury yield curve as a key indicator of what might happen next for the markets.
“The most fascinating thing is the 2-10s stiffener,” Novogratz said. “The curve flattened to -50bps between 2s and 10s. You come back  years old, only once in the 70s did he go through this. At some point it’s going to falter, and I think that’s going to be the big inflection point.”
One basis point is equal to 0.01 percentage point.
When the 2-year Treasury yield trades above the 10-year yield, many on Wall Street see it as a strong indicator of a recession. On Wednesday, the 2-year yield was trading at 3.278%, while the 10-year was at 2.803%.
Novogratz said he thinks investors are overconfident in a future Federal Reserve pivot, which could be one reason long-term rates are trading below short-term rates.
Goldman Sachs lowers its gold forecast
Goldman Sachs cut its gold forecast, saying it had overestimated how recession fears would drive prices.
The firm now sees gold averaging $1,850/toz over the next three months, before rising slightly to $1,950/toz for the rest of the year.
The new forecast is down from a previous outlook of $2,500/toz 12-months ahead. The company said it hit the target after reviewing how gold has traded over the past 20 years, noting that recession risks around tightening cycles were previously a bigger driver than actual rates.
“While we expected nominal rates to rise on the back of Fed hikes, we did not expect inflation expectations to fall as much after the failure of the transitional narrative and the lingering surprises high in inflation,” Goldman wrote in a note to clients.
“The key takeaway is that in the current environment of policy tightening and lingering recessionary issues, gold’s tactical direction will be determined by shifts in the Fed’s priority function between fighting inflation and support for growth,” the firm added.
U.S. gold futures traded at $1,811.40 an ounce on Wednesday.
The market could be overbought ahead of the CPI
The market’s recent rally could expose stocks to a pullback from Wednesday’s CPI, according to BTIG technical strategist Jonathan Krinsky.
The strategist said in a note to clients on Tuesday evening that stocks have made counter-intuitive moves after CPI reports this year, with positioning ahead of the report appearing to be a key factor in the market’s reaction.
“At the end of the day, no one knows what the number will be or how the market will react to that number, but from our perspective things are coming in quite overbought, which leaves room for the market to fall after the number,” he said. writes Krinsky. .
Elon Musk sells Tesla shares
Musk’s plan to buy Twitter has policymakers around the world worried.
Joe Skipper | Reuters
Elon Musk has sold Tesla shares worth around $6.88 billion – although he said earlier this year he had “no further TSLA sales planned”.
The Tesla CEO has sold 7.92 million shares of the electric vehicle company, according to a succession of financial documents on Tuesday evening. Documents filed with the SEC showed that the transactions took place between August 5 and 9. Tesla held its annual shareholder meeting on August 4.
Earlier this year, Musk took to social media to say he had no plans to sell Tesla stock after April 28. The billionaire investor is currently embroiled in a legal battle with Twitter, which he agreed to buy for around $44 billion.
Tesla shares rose 2% in pre-market Wednesday trading; Twitter is up 4%.
European stocks mixed ahead of key US inflation release
European markets were mixed on Wednesday morning as global investors awaited the key US inflation figure.
The pan-European Stoxx 600 was roughly flat late in the morning. Travel and leisure stocks climbed 1.3% while healthcare stocks fell 0.8%.
On the data front in Europe, consumer price inflation in Germany last July stood at 7.5% year-on-year and 0.9% month-on-month, according to official figures released on Wednesday, at roughly in line with expectations.
Earnings remain a key driver of individual stock prices in Europe. Ahold Delhaize, ABN AMRO, E.On, TUI Group, Metro, Deliveroo, Prudential and Aviva were among the top companies reporting before Wednesday’s bell.
Consumer prices in China hit two-year high as pork prices rebound
Customers buying pork at a food market in Shanghai, China. Prices for pork, a staple in China, rose 20.2% in July 2022 from a year ago, official data showed.
Qilai Shen | Bloomberg | Getty Images
China’s consumer price index in July hit a two-year high as pork prices rebounded, official data showed on Wednesday.
Hog prices rose 20.2% in July from a year ago, marking the first increase since September 2020, according to data from Wind Information.
Additionally, hog prices posted their largest month-over-month increase on record – up 25.6%. Agricultural commodity analyst at Nanhua Futures, Bian Shuyang, said in a statement that farmers’ reluctance to sell – in the hope of securing higher prices in the future – has contributed to the surge in the price of the pork.
Bian added that live hog producers are now operating at a profit, indicating there is more supply to come. Two upcoming Chinese festivals in September and October will help sustain consumer demand for pork, he said.
Nonetheless, Wednesday’s inflation data continued to reflect lackluster demand in the Chinese economy.
The consumer price index rose 2.7% in July, missing expectations of a 2.9% increase, according to analysts polled by Reuters. Moreover, despite the summer holidays, the tourism price component rose only 0.5% in July compared to a year ago.
— Lee Ying Shan and Evelyn Cheng
Goldman, BoFA and Barclays name their top consumer stocks
Market watchers are looking to July’s inflation report – due out later today – for clues as to what the Federal Reserve will do next at its September meeting.
Ahead of the report’s release, CNBC Pro scoured Wall Street research to identify what investment banks are watching for signs of consumer weakness and their advice on how investors should position themselves in this environment.
Learn about the consumer-related stocks analysts at Goldman Sachs, Bank of America and Barclays like.
— Zavier Ong
Regional Fed chairs expected to speak tomorrow
In addition to Wednesday’s consumer price index report, markets will also equate Fedspeak from two regional bank presidents. They could provide additional insight into the central bank’s course of action and the scale of future rate hikes, especially at the September meeting.
Charles Evans, president of the Federal Reserve Bank of Chicago, will speak Wednesday at 11:00 a.m. ET at Drake University in Des Moines, Iowa.
Later, Minneapolis Fed President Neel Kashkari will speak during a panel on stagflation at the Aspen Economic Strategy Group.
Key CPI report may show inflation has cooled
Shoppers at a grocery store in San Francisco, California, U.S., Monday, May 2, 2022.
David Paul Morris | Bloomberg | Getty Images
July’s inflation report may show prices have cooled – or so economists and investors hope.
Economists estimate for the July report that the consumer price index rose just 0.2%, less than the 1.3% it jumped in June, according to Dow Jones. This would bring the year-on-year pace of consumer inflation in July to 8.7%, down from the 9.1% seen in June.
If the reading is lower than last month, it may indicate that we have passed the peak of inflation and are starting to move in the right direction. This will indicate how much the Federal Reserve will raise rates going forward.
Coinbase and Roblox crash after hours trading
Shares of Coinbase and Roblox are among the largest after-hours moves on Tuesday after reporting earnings that fell short of Wall Street expectations.
Coinbase fell more than 5% after reporting revenue showing a bigger than expected loss in the quarter, and the company missed revenue estimates.
Roblox plunged more than 16% after missing out on profits and revenue. Additionally, the company also reported just 52.2 million average daily active users, down from 54.1 million in the prior quarter.