Here are five things you must know for Wednesday, September 14:
1. -- Stock Futures Attempt Clawback After Tuesday Carnage
U.S. equity futures traded higher Wednesday as investors looked to claw back losses from the biggest single-day decline in more than two years following a surprisingly strong reading of domestic inflation.
Wednesday's gains won't offset the declines from Tuesday's pummeling, however, which saw the S&P 500 slump 177.7 points, or 4.3%, and the Dow shed more than 1,200 points after Wall Street was caught off-guard by a hotter-than-expected August CPI reading.
Tech stocks were hit the hardest, with the Nasdaq Composite falling 5.16% to lop more than $500 million from the benchmark's value.
A big jump in core consumer prices, which rose 0.6% in August and 6.3% on the year, was powered by rising pressures across a broad range of the products and services, suggesting inflation may be slowly imbedding itself into the world's biggest economy, making the Fed's task of slowing it even more difficult.
Market reaction to the data, which also showed a headline annual rate of 8.3% that topped Street forecasts, lifted benchmark 2-year Treasury note yields to a fresh fifteen year high of 3.776% in overnight trading, while 10-year notes held at 3.431%, putting the yield curve deeper into inversion as traders calculated the impact of lingering inflation on the economy's growth prospects.
The dollar index, which tracks the greenback against a basket of six global currencies, surged more than 1.1% in the wake of the data release, but was blunted in overnight trading by reports that Japan is preparing to intervene in currency markets in order to prop-up a weakened yen, which is trading at four-decade lows.
The dollar index was marked 0.3% lower in the overnight session at 109.489, while the euro slipped below parity to 0.9994.
Europe stocks, which absorbed most of Tuesday's losses in the afternoon session, were marked only 0.15% lower in early Frankfurt trading, following on from a 2.8% decline for the Nikkei 225 in Tokyo and a 2.17% slump for the region-wide MSCI ex-Japan index.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 22 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 160 point advance. Futures linked to the tech-focused Nasdaq are indicating an 80 point move to the upside.
2. -- Traders Betting on 100 Basis Point Fed Rate Hike
Interest rate traders have rekindled bets on a 100 basis points rate hike from the Federal Reserve next week following a hotter-than-expected August inflation reading that shook global markets on Tuesday.
The CME Group's FedWatch tool, a real-time tracker of market expectations for potential changes in the Fed's target interest rate, suggests at least a 33% chance of a 1 percentage point move when the central bank wraps-up its two-day policy meeting on September 21.
The bulk of the better -- around 67% -- still suggests the Fed will deliver a 75 basis point hike, its third in succession, that would lift the Fed Funds rate to a range of between 3% and 3.25%.
The emergence of at least the potential for a bigger hike, the largest since December of 1980, suggests may fear an overreaction from the Fed based on Tuesday's surprisingly fast reading for both core and headline inflation. It's also lifted bets on a Fed Funds rate of around 4.25% by the end of the year, well ahead of the 3.75% to 4% forecast prior to the inflation release.
3. -- Twitter Slides After Shareholders Vote to Approve Musk Takeover
Twitter (TWTR) shares edged higher in pre-market trading following a vote late Tuesday to approve the social media group's disputed $44 billion takeover proposed by Elon Musk.
Just under 99% of shareholders voted to approve the deal, Twitter, following a special meeting established to gauge interest in the deal first made public last Spring. Twitter said the vote was the final pre-condition to needed under their merger agreement with Musk and that he is now obligated to pay $54.20 per share for the whole of the micro-blogging website.
Musk, of course, has said on several occasions that he will not go through with the deal, citing a lack of transparency in the company's calculation of so-called fake or bot accounts on the platform, as well as allegations of lax security and data privacy breaches made by a former company executive.
"Twitter continues to believe that Mr. Musk's purported termination of the merger agreement is invalid and without merit, and that the Musk parties continue to be bound by the merger agreement and obligated to complete the merger on the agreed terms and conditions,' the company said in a statement. "Twitter has filed a lawsuit in the Delaware Court of Chancery to compel Mr. Musk to complete the acquisition, and Twitter remains committed to doing so on the price and terms agreed upon with Mr. Musk."
Twitter shares were marked 0.9% lower in pre-market trading to indicate an opening bell price of $41.35 each.
4. -- Starbucks Leaps After Boosting Near-Term Profit Goals
Starbucks (SBUX) shares jumped higher in pre-market trading after the world's biggest coffee chain boosted its near-term earnings growth forecast.
Starbucks said it sees earnings growing by between 15% and 20% each year, for the next three years, improving on its prior forecast of a gain of between 10% and 12%, the company said at its investor day presentation in Seattle.
Comparable worldwide sales, Starbucks said, should rise by between 7% and 9% over the 2023 fiscal year, although it referenced the timing of China's post-Covid recovery. The new forecast is around 3% ahead of the mid-point of its prior forecast, CFO Rachel Ruggeri said.
Comparable sales growth in the U.S. is also forecast to rise between 7% and 9%, Starbucks said.
“Guided directly by our partners, we have already begun to take action on an inspired roadmap to build the future of Starbucks, all while staying true to our mission of uplifting communities through a shared love for coffee and further extending our coffee leadership and innovation," said interim CEO Howard Schultz. "I am confident that our partners and world-class leadership team will capture the significant global growth opportunity ahead, unlocking value for all our stakeholders.”
Starbucks shares were marked 2.7% higher in pre-market trading to indicate an opening bell price of $90.21 each.
5. -- President Biden Pushes For Rail Strike Solution As Deadline Looms
U.S. Secretary of Labor Marty Walsh will host a meeting between railway company executives and union leaders Wednesday aimed at preventing a potentially network-crippling strike scheduled for later this week.
All of the major U.S. freight rail operators, including Union Pacific (UNP), Norfolk Southern (NSC) and CSX Corp. (CSX) have until midnight on Friday to reach an agreement with unions representing around 60,000 members amid a long-running dispute over working conditions, wages and employee safety.
The strike, if it goes into effect, could cost the U.S. economy around $2 billion a day, disrupt passenger rail networks and add to inflationary pressures by delaying the delivery of key energy, food and consumer goods.
President Joe Biden, who put together a internal task force to establish settlement terms in July, is reportedly considering invoking emergency powers to keep freight moving, while White House Press Secretary Karine Jean-Pierre said the government will ask truck and air-freight companies to step-up their shipments in the event of a strike.
