US inflation comes in a “switch” higher than analysts expected, which worries shareholders, but some stocks hold on. The Dow Jones fell 0.16%, the SNP500 rose 0.18%, but the NASDAQ shocked investors by increasing 0.49%. However, experts note that investors should only know that some indexes showed signs of significant declines. So far, the market is attempting to shrug off the inflation data. However, it will become more difficult to ignore if today’s producer inflation data also reads higher than expectations.
Investors will primarily look at today’s Producer Price Index, which analysts expect to read 0.4% and the Core PPI 0.2%. If these figures also read higher, investors will deem it an indication that inflation will likely remain high in October. As a result, Bulls may struggle to fight off the market’s “bears”. European equities this morning opened higher but have been declining ever since. The DAX and CAC are falling 0.30%, but Asian stocks are experiencing mixed price movement.
The European Central Bank will release its interest rate decision this afternoon and conduct a press conference. Currently, economists believe the central bank will “pause” outnumber individuals speculating a hike. The decision from the ECB will significantly influence the Euro and global stocks. If the ECB hikes or gives an ultra-hawkish signal in the press conference, both European and US stocks can potentially decline. Investors may also view a hawkish ECB as an indication the Fed will also follow.
NASDAQ Climbs Despite Inflation Worry
The NASDAQ during yesterday’s trading session had three significant price waves with two moving in the downward direction. However, the largest impulse wave was bullish, 2-hours after the release of the US inflation rate. Therefore, the index ended the day higher than the market open. Nevertheless, investors should note signs of active sellers on the Order Flow book and the Cumulative Delta statistics. Therefore, technical analysts are now contemplating if investors will trade back to the previous price range, forming a correction. This is also something we saw on Tuesday after Monday’s gains.
Currently, technical analysis is indicating a retracement as the price slightly declines. However, there are signs the retracement may continue to form a correction. The price is currently above the previous price range and is at a resistance level. In addition to this, European Indices are seeing a substantial decline. Investors will monitor if the decline continues as we approach the US stock market. Sell signals will become more apparent if the price declines below $15,400.50.
A positive factor for the stock market is that US Bond Yields fell on Wednesday. However, the yields are rising during this morning’s Asian session. Experts are almost unanimously confident that the interest rate will remain at 5.25%-5.50% at the US Fed meeting to be held next week. The Chicago Mercantile Exchange (CME) FedWatch Tool indicates a 93.0% probability that the Federal Fund Rate will remain unchanged. However, this will also depend on today’s producer inflation figures. However, there is only a 59% possibility of the rate staying unchanged at November’s meeting. This morning, another negative factor for the global stock market is the rising Commodity and Dollar prices.
The stocks holding a higher weight within the NASDAQ performed well during yesterday’s session. Amazon, the third most influential stock, rose 2.56%, Advanced Micro Devices 2.28%, and NVIDIA, the fourth most influential stock, rose 1.37%. Of the ten stocks with the highest weights, only Apple declined, falling 1.19%. The performance of the top five stocks after market close is performing well so far, but investors should keep monitoring this as we approach today’s open. 45% of components ended the day lower on Wednesday, with Netflix seeing the most significant decline, falling 5.16%.
Lastly, Adobe will release its Quarterly Earnings report tonight after the market closes. Adobe holds a weight of 2.13% and is the 10th most influential stock on the NASDAQ. Analysts expect the company to confirm earnings of $3.98 per share and revenue of $4.87 billion. The company has outperformed expectations on the past three occasions, and if the figures are again higher than expectations, the stock may rise. So far this year, the stock has risen 64.30%.
EUR/USD - ECB Decision and Producer Inflation Looms
The price of the EUR/USD continues to experience a reverting market as it has since Monday. This means market participants are clearing pricing in a specific price zone, hence why the price corrects back to the range after breakouts. The reversion price is 1.07363, also where the price is trading this morning. The Euro has been declining against the Dollar over the past 3 hours, and strong sell signals will arise if the price declines below 1.07272. However, investors should note the exchange rate’s reverting nature over the past week.
To establish if sell signals are not likely to be a false breakout, investors can also monitor the US Dollar Index. The US Dollar Index will better indicate the currency’s direction and price condition. The US Dollar Index is slightly lower than the open price but has risen over the past 4 hours. The Euro, on the other hand, is experiencing weak bullish price movement against all other currencies.
The Consumer Price Index for the US read as expected, 0.6%, but the Core CPI read 0.3%, which was higher than expectations. The US inflation rate rose from 3.2% to 3.7%, again slightly higher than expectations. However, the ECB rate decision and forward guidance will primarily affect today's price movement. In addition, the US Producer Price Index and Retail Sales data.
Summary:
- The US inflation rate rose from 3.2% to 3.7% and the Core Consumer Price Index reads higher than Wall Street expectations.
- Stocks experience selling pressure but the NASDAQ fights off the market bears. The NASDAQ ended the day 0.49% higher.
- According to the CME exchange, most economists believe the Fed will continue to pause but will hike before the end of the year.
- Adobe will release its Quarterly Earnings report. Adobe holds a weight of 2.13% and is the 10th most influential stock on the NASDAQ. Analysts expect the company to confirm earnings of $3.98 per share and revenue of $4.87 billion.
- Investors turn to the US’s producer inflation and the ECB’s rate decision.
