Five things you must know about Wednesday, August 17:
Stock Futures Rise As Inflation Concerns Resurface
As investors fear that rising consumer sentiment, retail spending, and job growth will continue to stimulate domestic inflation and trigger further Fed rate rises, US equity futures fell lower Wednesday. Treasury bond rates rose slightly, and the dollar strengthened against its worldwide counterparts.
Walmart (WMT) and Home Depot (HD) reported better-than-expected second quarter earnings, as well as what appears to be a solid rebound in GDP growth prospects, that pushed the Dow past the 34,000 point mark for the first time since May.
The increases, which followed an absout July job count that included 528,000 new hires and a wage increase of 5.2 percent, add to worries that inflation levels may rise again in the months ahead.
According to the CME Group's FedWatch, the Bank of New Zealand's overnight rate rise, as well as a shocking 10.1% reading for July inflation in the United Kingdom, the highest in forty years, have bolstered concerns. The odds of another jumbo Fed rate rise in September have risen to around 48.5% overnight.
In overnight trading, benchmark 2-year Treasury note rates rose by 5 basis points to 3.308%, while 10-year notes rose by 2.868%. Even though the Atlanta Fed's GDPNow forecasting tool says the economy is growing at a 1.5 percent rate.
The US dollar index, which tracks the greenback against a basket of six global currency peers, was 0.03% higher at 106.608.
Oil prices extended their recent decline, bringing US crude to within sight of a six-month low ahead of weekly Energy Department data on domestic crude stocks at 10:30 am Eastern time.
Brent contracts for October, the global benchmark, fell 55 cents to $91.75 per barrel. WTI crude futures for September delivery were marked 27 cents lower at $85.26 per barrel.
For the first time in seven months, European stocks remained relatively unchanged, with the Stoxx 600 up 0.05% in early Frankfurt trading, and overnight in Asia, the region-wide MCSI ex-Japan index rose 0.16% and the Nikkei 225 up 1.23% to regain the 27,000 point mark.
Futures linked to the S&P 500 are predicting a modest 3 point opening bell decline, while those linked to the Dow Jones Industrial Average are projected for a 60-point decline, while futures linked to the tech-focused Nasdaq are forecasting a 60-point decline.
As a result of the large rate rise, the Fed is keeping a close eye on the second half of the month.
Minutes from the Federal Reserve's July policy meeting are likely to suggest slower rate rises in the second half of the year, with Chairman Jerome Powell and his colleagues contenting to focus on a wealth of data before their next decision in September.
The July minutes, published at 2:00 pm Eastern time, will detail the Fed's second consecutive 75 basis point rate hike, which brought the benchmark Fed Funds rate to a range of between 2.25% and 2.25%.Powell said at the time that the Fed 'wouldn't hesitate' to proceed with another huge rate hike if the Open Markets Committee deemed it appropriate.
Since then, the headline CPI has slowed significantly, to a pace of 8.5 percent in July, as well as two additional PCE Price index releases and another jobs report, which are scheduled before the September 21 decision.
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The FedWatch tool from the CME Group now predicts a 48.5% probability of another 75 basis point increase in September, with bets on a smaller 50 basis point increase at 51.5 percent, essentially near the same levels as in the immediate aftermath of the July hike, but around 10 percentage points higher than a week ago.
Retail sales are on the rise as gas prices fall.
Wednesday, retail sales, as well as key earnings from the sector, will be highlighted again as the Commerce Department releases official July data that is likely to illustrate the effect of rising domestic gas prices.
Economists forecast that headline retail sales would have risen by around 1% in the month, as the total fell from June's $680.6 billion high due to the persistent drop in gasoline prices. Core retail sales, which exclude volatile components such as food and energy, may actually decrease by about 1%.
According to Bloomberg data, Americans are spending $400 million less every week as a result of the drop in gas prices, which have declined for 61 consecutive days to a national average of about $3.943 per gallon.
"Consumer demand has moderated, but has not collapsed," said Ian Shepherdson of Pantheon Macroeconomics. "People are choosing to lessen the strain from the gas price hit by cutting some of the huge savings accumulated during the epidemic."
Target Higher After Walmart Surprise Lifts Q2 Earnings Hopes
Target (TGT) stock plummeted higher in pre-market trading ahead of the retailer's eagerly anticipated second quarter earnings prior to the opening bell.
Target, which warned in June that a larger-than-expected 35% increase in overall inventories would likely result in price reductions and operating margins would narrow to around 2% during the second current quarter before rebounding into the second half of the year, is expected to report a bottom line of 72 cents per share on revenues of $26.04 billion.
Walmart's spring warning triggered the largest single-day selloff in its history, but a surprisingly strong quarter yesterday, as well as falling gas prices and improving consumer confidence, might give the shop some unexpected confidence heading into the second half of the year.
In pre-market trading, target stock was marked 0.67% higher, indicating an opening bell price of $181.40.
Bed, Bath & Beyond Rally Takes Flight In A Revived Meme-Stock Rally
In pre-market trading, Bed, Bath & Beyond (BBBY) shares climbed higher as the meme stock favorite extended its gains following a bullish options wager from GameStop (GME) chairman Ryan Cohen.
According to Securities and Exchange Commission filings, Cohen built a position in the home goods retailer last year and has asked for significant changes, including the sale of its buybuy Baby division.
A call option gives the purchaser the right, but not the obligation, to purchase shares at a certain price in the future.
Bed & Bath & Beyond shares have increased by more than 350% in the last three weeks, owing to notably large trade volume, amid a surge in interest in the company, which may also be connected to a so-called "short squeeze" that seeks to penalize investors who are betting against a particular stock.
In pre-market trading, Bed, Bath & Beyond shares were marked 8.65% higher, indicating a $24.50 opening bell price.