US open: Markets rangebound but rate-cut hopes rise after CPI data

11th Jul 2024 14:43

(Sharecast News) - US stocks opened broadly flat on Thursday, with futures erasing earlier losses, as investors digested better-than-expected inflation and labour-market data and pondered over how the Federal Reserve may respond.

The annual inflation rate fell more than forecast to its joint lowest level in more than three years in June, while jobless claims declined to a five-week low, raising hopes that an interest-rate cut from the Fed in September may now be on the cards.

"This data release was seen as crucial for the timing of rate cuts from the Fed, after Jerome Powell said that the US central bank still wanted to see progress made on inflation before cutting interest rates. This is the progress that they will want to see," said Kathleen Brooks, research director at XTB.

All three benchmark indices on Wall Street were swinging between gains and losses early on, though trading was very much rangebound, with both the S&P 500 and Nasdaq hitting fresh record highs on Wednesday. By 0951 in New York, the Dow was up 0.06%, the S&P 500 rose 0.04% and the Nasdaq was down 0.09%.

All eyes on the data

The annual rise in the consumer price index slowed to 3.0% last month, down from 3.3% in May and below the consensus forecast of 3.1%. This was the lowest level since June 2023, matching a reading not seen since March 2021, while the monthly change in prices turned negative (-0.1%) for the first time since May 2020.

Meanwhile, core annual inflation, which strips out volatile items like food and energy, unexpectedly eased to 3.3% from 3.4%, surprising economists who had projected no change. This was also the lowest level since April 2021.

Brooks said the data "has given the green light to traders to fully price in a rate cut from the Fed in September", with investors now pricing in a 80%-plus chance of a rate cut at that meeting. "The market is also pricing in more than two rate cuts this year, not long ago only one rate cut was priced in," she said.

Meanwhile, initial filings for unemployment benefits totalled 222,000 in the week ended 5 July. That's down from a revised 239,000 the week before and well below the dip to 236,000 expected by economists. The four-week moving average, which smoothes out week-to-week volatility, fell to 233,500 from a revised 238,750 the week before.

Costco falls after price hike

Shares in Costco fell on the back of the wholesale retailer's announcement of its first price increase in seven years. The company said it was hiking its annual membership price by $5.

Apple fell after the European Commission approved plans to open up its contactless payments system to rivals, drawing a line under a long-running antitrust probe. Regulators ruled in 2022 that Apple was breaking competition laws by blocking rivals' access to favour its own payment system. In response, Apple offered various concessions, which officials have spent the last six months testing.

Delta Air Lines dropped sharply after reporting a 30% fall in second-quarter net income and disappointing the market with its sales guidance for the current quarter.