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Wall Street Stock Futures Lower Ahead of Key Inflation Data

Futures lower in pre-market action, a day after fresh records. CPI data for July expected later today, inflation rate forecasted to ease.

SageFX - Aug, 11, 21

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Principal Points

  • Equity futures lower in pre-market action on Wednesday, a day after fresh records
  • CPI data for July expected later today, annual inflation rate forecasted to ease

Stock index futures were little changed in overnight trading on Wednesday. The calm pre-market environment ahead of the opening bell for the regular session comes after main averages pushed to new record closing levels on Tuesday.

Following the passing of the $1tn infrastructure bill in the Senate, real-economy stocks were in fashion as energy, industrials and materials led the gains. The Dow Jones Industrial Average added over 160 points, or nearly half a percent, to set a fresh record at 35,264.67. The S&P500 notched a relatively small gain of fewer than 5 points. The upside move was sufficient to bring the broad-based benchmark to a new all-time high of 4,436.75. The Nasdaq Composite dropped 72 points to finish the session at 14,788.09.

Apart from traders and investors enjoying a strong earnings season, it appears the market is also in a record-setting year. Over the year, which so far has been through 155 trading days, the 30-stock Dow Jones index has set 31 record closings, or an average of a new record high every five trading days.

The S&P500, for the same period, has blasted through 45 record closings, or a record every 3 days on average.

The consistent stellar performance for both stock gauges has been underpinned by constant monthly cash injections from the Federal Reserve. In addition, the US government has plowed trillions of dollars this year alone in efforts to sustain economic growth amid the pandemic.

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The elevated spending and the record amounts of money flowing in the system, however, have resulted in increased risks of overheating the economy. A steep and steady rise in the rate of inflation over the past few months has caused investors to worry over the lofty valuation of the stock market.

That in turn, has tilted the Federal Reserve to start discussions over scaling back or tapering, the $120bn of asset purchases a month. Moreover, the low-interest rates that have allowed for ultra-loose borrowing conditions, are about to be revised to the upside as soon as 2023.

To get a fresh perspective over the economic health and how prices float on the inflation spectrum, the latest consumer price report (CPI) data is expected later today. The inflation reading by the US Labor Department will reveal whether the upward trend in inflation has continued through July.

The CPI print will also serve as guidance for both the Federal Reserve and market participants over how soon the US central bank could be expected to roll back its easy-money policies. As a start, investors expect Fed officials to soon announce their first tapering cycle that would reduce the $120bn of government debt purchases.

Economists polled by Bloomberg project consumer prices to have ticked higher by 0.5% on a monthly basis. The inflation rate year-on-year is expected to have eased to 5.3%, from 5.4% in June.

Meanwhile, European bourses today are showing continued optimism across the board. While major European indexes hover slightly in the green, the pan-continental Stoxx 600 maintains its record-high level set Tuesday.

In cryptocurrency market action, major coins today are trading to the upside as crypto traders and investors are looking to extend the positive performance into a third straight day. Bitcoin has gained about 1% on the day to the current market price of roughly $46,000. Ether is also higher, currently hovering around $3,200, up a little over 1% on the day.