US Markets Brace for Rates Increase as Inflation Data Exceeds Expectations
By U.S. stock and bond markets will be closed on Monday for President's Day.[0] Concerns have been raised that the Federal Reserve may increase interest rates more than expected, due to the recent reports on consumer and producer price inflation and retail sales. Comments from Federal Reserve officials have exacerbated fears, with some suggesting that the central bank may increase rates by an additional 50 basis points in the upcoming month.
This morning's inflation reading was higher than anticipated.[1] In January, the consumer price index increased by 0.5% from the previous month and was 6.4% higher than the same month the previous year[2] Dow Jones reported that economists expected the Consumer Price Index to increase by 0.4% in January, resulting in a 6.2% year-over-year rise.[1] The Core Consumer Price Index (CPI), which does not include energy and food, increased 0.4% and 6.2%, respectively, surpassing expectations.[3]
Six sixteen[4] On Sunday, east of the US, the Dow Jones Industrial Average futures dropped by 32 points (0.1%), the S&P 500 futures were down 0.1%, and the Nasdaq Composite futures decreased by 0.2%.[4] At 7:10 AM Eastern Time, the Dow futures had dropped 21 points, the S&P 500 futures had decreased 6.50 points, and the Nasdaq 100 futures had gone down 27.75 points. Concerns have been raised that the Federal Reserve may increase interest rates more than expected, due to the recent reports on consumer and producer price inflation and retail sales.
At 7:15 am Eastern Time, the Dow futures had dropped 293.00 points, the S&P 500 futures had decreased by 33.50 points, and the Nasdaq 100 futures had declined by 133.50 points. As the Federal Reserve prepares to reconvene next month, they have been paying close attention to inflation data.[3] The market forecasts that they will increase the interest rate by a quarter of a percentage point, and carry out another rate increase in May, resulting in the benchmark rate rising above 5% with its highest point reached in July.[5]
The Commerce Department's Retail Sales for January will be published at 8.30 am ET.[5] An increase of 1.7 percent has been agreed upon, as opposed to the decrease of 1.1 percent seen in December. At 10.00 am ET, the Business Inventories for December from the Commerce Department will be released.[6] It was determined that there would be an increase of 0.3 percent, compared to the 0.4 percent increase seen in November.
0. “PCE Report Along with Retail and Tech Earnings Highlight Shortened Trading Week” InvestorsObserver, 20 Feb. 2023, https://www.investorsobserver.com/news/featured/pce-report-along-with-retail-and-tech-earnings-highlight-shortened-trading-week
1. “5 things to know before the stock market opens Tuesday” CNBC, 14 Feb. 2023, https://www.cnbc.com/2023/02/14/5-things-to-know-before-the-stock-market-opens-tuesday-february-14.html
2. “The Club's top 10 things Tuesday: CPI, volatile market, oil dips” CNBC, 14 Feb. 2023, https://www.cnbc.com/2023/02/14/the-clubs-top-10-things-tuesday-cpi-volatile-market-oil-dips.html
3. “Producer prices, Applied Materials, Constellation Energy: 3 things to watch” Yahoo! Voices, 15 Feb. 2023, https://www.yahoo.com/now/producer-prices-applied-materials-constellation-160225623.html
4. “Stocks Poised for Lower Open on Monday” Barron's, 12 Feb. 2023, https://www.barrons.com/articles/stocks-poised-for-lower-open-on-monday-d9998ebf
5. “Retail sales, Cisco earnings, Shopify results: 3 things to watch By Investing.com” Investing.com Canada, 14 Feb. 2023, https://ca.investing.com/news/stock-market-news/retail-sales-cisco-earnings-shopify-results-3-things-to-watch-2902781
6. “Wall Street Might Open Broadly In Negative Territory” RTTNews, 15 Feb. 2023, https://www.rttnews.com/3344275/wall-street-might-open-broadly-in-negative-territory.aspx
