Wednesday October 12th


Dow futures are flat as investors fear inflation will drive the Fed to keep raising rates

U.S. stock markets index futures traded flat Wednesday as investors weighed price data that came in higher than expected, signaling more interest rate hikes are ahead as the Federal Reserve looks to tame high inflation. Futures tied to the Dow Jones Industrial Average added 47 points, or 0.16%. S&P 500 futures and Nasdaq 100 futures were up 0.26% and 0.35%, respectively. Stock futures pared gains from earlier in the morning when the September producer price index, a gauge of final-demand wholesale prices, came in higher than expected. The print was up 0.4% in September, more than the consensus estimate of a 0.2% increase, according to Dow Jones. The PPI number is one of the inflation gauges investors are watching alongside the Federal Reserve. If inflation continues to be high, the central bank is more likely to continue its aggressive path of interest rate hikes to bring it back into check. That means rates will continue to rise and my stay high for longer than markets expect, weighing on stocks. Investors will get more inflation data on Thursday, when the September consumer price index report is released. The CPI number is a measure of price changes in a basket of common consumer goods and services. The minutes from the Federal Reserve’s September meeting will also be released Wednesday. While Fed Chairman Jerome Powell has acknowledged that aggressive interest rate increases could be painful, the central bank will continue to charge forward in its fight to lower inflation. “Powell has repeated, in what has become his mantra, that without price stability we cannot have a strong economy or a strong labor market,” said Quincy Krosby, chief global strategist for LPL Financial. “Investors are concerned that restrictive monetary policy, that is, tighter financial conditions, could lead to the kind of financial accident that dries up liquidity and delivers more harm to the global economy.” Asia-Pacific markets were mixed on Wednesday, with some indexes struggling for direction amid concerns over the global economy. Investors are also waiting for inflation data from the U.S. due later this week. The Shanghai Composite in mainland China rose 1.53% to end the session at 3,025.51, and the Shenzhen Component gained 2.464% to close at 10,838.48. Both indexes earlier lost more than 1.5% each. Hong Kong’s Hang Seng index recovered but was 0.56% lower in the final hour of trade, while the Hang Seng Tech index was up 0.11%. In Japan, the Nikkei 225 closed fractionally lower at 26,396.83 and Topix lost 0.12% to 1,869. Japan’s yen was hovering around 146 against the dollar. The S&P/ASX 200 in Australia 0.04% higher at 6,647.50. South Korea’s Kospi gained 0.47% to 2,202.47 and the Kosdaq was higher by 0.32% to 671.67. Oil futures recouped some losses on Wednesday, recovering from a 2% slide in the previous session, supported by supply concerns stemming from last week’s OPEC+ cut to its production target, though a stronger dollar weighed on sentiment. Brent crude futures last down 17 cents, or 0.18%, at $94.12 a barrel after touching a session low of $93.33. U.S. West Texas Intermediate crude was down 37 cents, or 0.43%, at $88.97 after a session low of $88.27. Gold prices edged higher on Wednesday helped by a slight pullback in the dollar, as investors look to minutes from the U.S. Federal Reserve’s September policy meeting and inflation data for clues on its rate hike path. Spot gold was last up 0.13% at $1,666.4781, after falling for five straight sessions. U.S. gold futures slipped 0.66% to $1,674.80.