Tuesday September 14th


Stock futures jump after CPI inflation report comes in less than expected

U.S. stock index futures jumped Tuesday after a key inflation reading showed consumer prices rising less than expected. Futures contracts tied to the Dow Jones Industrial Average jumped 115 points, or 0.3%. S&P 500 futures rose 0.4% and Nasdaq 100 futures added 0.4%. The August consumer price index, while still showing a significant jump in inflation, came in less than feared. August CPI jumped 0.3% month-to-month, or 5.3% from a year earlier, below the 0.4% increase and 5.4% annual gain expected respectively by economists polled by Dow Jones. The less volatile core reading excluding food and energy costs showed just a slight gain, up 0.1% and below the 0.3% consensus increase expected by economists. The print comes after producer prices jumped 8.3% year over year during August, marking the largest annual increase since records were first kept in November 2010. Apple shares were slightly higher in premarket trading ahead of an event Tuesday where it’s expected to announce new versions of the iPhone, AirPods and Apple Watch. The major averages are all down at least 1% for September, and RBC doesn’t see the S&P 500 surging into the end of the year. The firm raised its year-end target for the benchmark index to 4,500 on Monday, up from a prior target of 4,325. The new target is less than 1% above where the index closed on Monday. The firm also introduced a 2022 year-end target of 4,900. “We continue to think the S&P 500 will experience a bout of volatility/meaningful pullback before the year is up, a call that we’ve been making for the past several months due to elevated equity market sentiment and positioning,” the firm wrote in a note to clients. “While we take the reasons for a pullback seriously, we also see economic recession risks as low, reducing the likelihood of a full growth scare, and intend to treat it as a buying opportunity,” RBC added. The Federal Reserve begins a two-day policy meeting on September 21. On Monday, the Dow and S&P both advanced for the first time in six sessions as investors bet that some recent selling looked overdone. The Dow gained about 260 points, or 0.76%, after at one point during the session rising nearly 1%. The S&P advanced 0.23%. Stocks linked to the economic reopening on Monday – including airlines and cruise line operators — rebounded slightly after the seven-day daily U.S. Covid case average declined to around 144,300, down from roughly 167,600 cases per day at the beginning of the month. “In the near-term, we expect increased stock market volatility, although long-term investors should use pullbacks to add to stock exposure,” noted Richard Saperstein, chief investment officer at Treasury Partners. “The next six weeks tend to be seasonally weak for stocks, which is an additional worry for a stock market that is already facing elevated valuations and a lack of near-term upside catalysts,” he added. The National Federation of Independent Business will also release its latest survey on Tuesday, which will provide investors with a pulse on how small businesses are faring. In Washington, House Democrats proposed new tax hikes to pay for the $3.5 trillion spending package. A summary from the Ways and Means Committee showed that the plan calls for top corporate and individual tax rates of 26.5% and 39.6%, respectively. Shares in Asia-Pacific were mixed on Tuesday as investors looked ahead to the release of U.S. consumer inflation data for August. The broader Hang Seng index in Hong Kong closed 1.21% lower at 25,502.23, after to losses after its Monday drop. Mainland Chinese stocks closed lower, with the Shanghai composite declining 1.42% to 3,662.60 while the Shenzhen component shed 0.542% to 14,626.08. The Nikkei 225 in Japan rose 0.73% to close at 30,670.10 while the Topix index jumped 1.01% to 2,118.87. South Korea’s Kospi gained 0.67%, closing at 3,148.83. Oil prices extended gains on Tuesday, hovering near a six-week high, on signs another storm could affect output in Texas this week even as the U.S. industry struggles to return production after Hurricane Ida wreaked havoc on the Gulf Coast. Brent crude rose 55 cents, or 0.75% to $74.06 a barrel, having gained 0.8% the previous day. U.S. West Texas Intermediate (WTI) crude climbed 50 cents, or 0.8%, to $70.99 a barrel, after rising 1.1% on Monday. Both benchmarks were hovering near their highest since early August hit the previous day. Gold prices were subdued on Tuesday with investors setting their sights on U.S. consumer price data that could offer clues on when the Federal Reserve decides to temper its economic support. Spot gold edged 0.3% lower to $1,787.66 per ounce by 9:25 a.m. GMT, U.S. gold futures fell 0.3% to $1,789.50.