Stocks Mixed After U.S. CPI Shock Raises Fed Rate Risks

Morning Markets

September S&P 500 futures (ESU22) are trending up +0.66% this morning after three major US benchmark indices veered sharply lower, marking their biggest single-day percentage declines since June 2020. A broad sell-off sent U.S. stocks deep into negative territory as hotter-than-expected inflation data dashed hopes that the Fed could soften its policy tightening in the coming months. Three major U.S. stock indexes were weighted down primarily by losses in the Technology, Consumer Services, and Industrials sectors.

"The sell-off is not a surprise given the rally running up to the data," said Paul Nolte, a portfolio manager at Kingsview Asset Management in Chicago. The report emphasizes "very persistent inflation, and that means the Fed is going to remain engaged and raise rates," Nolte added. U.S. rate futures have priced in an 81% chance of a 75 basis point rate increase and an almost 20% chance of a full 100-basis-point hike at next week's policy meeting.

Today, all eyes are focused on the Labor Department's producer price index (PPI) data in a couple of hours. Economists, on average, foresee that August PPI will stand at -0.1% m/m compared to the previous value of -0.5% m/m.

U.S. Crude Oil Inventories data will be reported today as well. Economists forecast this figure to come in at 0.833M, compared to the previous value of 8.844M.

In the bond markets, United States 10-Year rates are at 3.435%, up +0.36%.

The Euro Stoxx 50 is down -0.22% this morning as the U.S. inflation surprise weighs on sentiment. European stocks have received a negative handover from Wall Street and Asia after the U.S. August CPI report pointed to more steep interest rate hikes by the Federal Reserve.

U.K. Consumer Price Index, PPI Input, and Nationwide HPI data were released today. 

U.K. August CPI rose +0.5% m/m and +9.9% y/y, weaker than expectations of +0.6% m/m and +10.2% y/y.

U.K. August PPI Input stood at -1.2% m/m compared to the last month's figure of 0.0% m/m and weaker than expectations of +0.3% m/m.

U.K. Nationwide HPI came in at +15.5%, stronger than expectations of +7.9%.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.80%, and Japan’s Nikkei Stock Index (NIK) closed down -2.78%.

China’s Shanghai Composite today closed down, tracking similar declines on Wall Street amid the U.S. inflation data. Tensions between the U.S. and China also were weighing on sentiment. Meanwhile, the U.S. is considering new sanctions against Beijing to deter potential aggression against Taiwan.

"The external environment of a European energy crisis, a China slowdown, and a strong dollar combined with ongoing interest rate hikes domestically and a slower housing market raise concerns about the growth story heading into year-end," analysts at ING wrote in a note.

At the same time, Japan’s Nikkei Stock Index logged a sharp decline today, fueled by losses in the Transportation Equipment, Automobiles & Parts, and Textile sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 4.44% to 18.30.

The Japanese July Industrial Production has been reported at +0.8% m/m, below an economic forecast of +1.0% m/m, and below June's figure of +1.0% m/m.

Pre-Market U.S. Stock Movers

Aditx Therapeutics Inc (ADTX) gained over +50% in pre-market trading after the company completed a 1-for-50 reverse stock split.

Starbucks Corporation (SBUX) rose +3% in pre-market trading after the company after the company updated its outlook, seeing 15-20% adjusted EPS growth in FY23-FY25.

Akero Therapeutics Inc (AKRO) dropped about -2% in pre-market trading after the company announced an underwritten public offering of $175.0 million shares of its common stock.

NVIDIA Corporation (NVDA) climbed over +1% in pre-market trading after Cathie Wood's ARK Investment bought 15K of the company’s shares yesterday.

POINT Biopharma Global Inc (PNT) fell about -8% in pre-market trading after the company commenced an underwritten public offering of its common stock.

Seagate Technology PLC (STX) climbed +3% in pre-market trading after Exane BNP Paribas initiated coverage with a Neutral rating and a $70 price target.

Today’s U.S. Earnings Spotlight: Wednesday - September 14th

Aspen (AZPN), BRP Inc (DOOO), Sprott Physical Gold and Silver Trust (CEF), Manchester United (MANU), LiCycle Holdings (LICY), Eaton Vance Tax Manag Glb Buy Write (ETW), Value Line (VALU), Tsakos Energy (TNP), Eaton Vance Tax Managed Buy Closed (ETB), Skillsoft Corp Class A (SKIL), Mesabi Trust (MSB), Ironnet (IRNT), Niocorp Developments (NIOBF), Bridgford (BRID), Rezolute (RZLT), Nobility Homes (NOBH), Upexi (UPXI), RF Industries (RFIL), AMREP (AXR), Renalytix AI Nas (RNLX), PharmaCyte Biotech (PMCB), MamaMancinis (MMMB), LightPath (LPTH), SigmaTron (SGMA), Davidstea Inc (DTEA), Applied Genetic (AGTC), IDW Media Holdings (IDW), InMed Pharmaceuticals (INM), Aytu BioScience (AYTU), Bon-Ton Stores (BONTQ), Silence Therapeutics (SLN).