Here are five things you must know for Wednesday, July 13:
1. -- Stock Futures Edge Higher As Inflation Data Looms
U.S. equity futures edged cautiously higher Wednesday, while the dollar traded firmer against its global peers and oil prices steadied, as investors braced for a key reading of June inflation prior to the start of trading.
Inflation prospects for the world's biggest economy, where consumer prices are accelerating at the fastest pace in forty years, remain the flashpoint for both U.S. stocks as investors, analysts and economists attempt to gauge its impact on both GDP growth and central bank reactions.
Global stocks, as well, are pointedly tracking U.S. inflation data, as well as the Federal Reserve's likely response, as the dollar trades near its highest levels in 20 years, adding further pressures on non-dollar economies as they purchase oil, gas and other commodities in overseas markets.
An expected headline reading of 8.8%, a new four-decade high, would likely cement the case for faster rate hikes heading into the autumn, while a retreat in core consumer prices, which have fallen for two consecutive months, could trigger a pullback.
The inflation reading, set for 8:30 am Eastern time, will also tee-up the unofficial start of the second quarter earnings season, with June quarter updates from JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC) expected before the end of the week.
Collective S&P 500 earnings are forecast to rise by 5.8% from last year over the second quarter, to a share-weighted $465.3 billion, with energy and industrials pacing the anticipated gains.
The bond market's recession warning, however, continues to flash red, with the steepest inversion of the yield curve since 2007 and the weakest demand for a 10-year note auction in more than two years during yesterday's $33 billion sale.
Benchmark 2-year Treasury note yields are trading at 3.05% while 10-year notes are pegged at 2.963%. The dollar index, which tracks the greenback against a basket of its global peers, was marked 0.12% higher at 108.197.
On Wall Street, futures tied to the S&P 500 are indicating a 12 point opening bell gain while those liked to the Dow Jones Industrial Average are priced for a 75 point move to the upside. Futures linked to the tech-focused Nasdaq are indicating a 40 point advance.
2. -- Core Inflation in Focus As Headline Expected to Spike To 8.8%
Investors and analysts will likely focus on the Commerce Department's breakdown of core consumer prices pressures when the June CPI data is released prior to the start of trading as markets begin to bet on the prospect of peak inflation in the world's biggest economy.
Headline CPI is likely to surge higher, however, and could come in at an annual rate of 8.8%, the highest in more the four decades, as fuel, food and energy prices continue to rise. On a monthly basis, headline CPI will likely rise by 1.1%. Core CPI, which strips out those volatile components, is expected to rise around 0.6% on the month, reflecting an easing in rents, airfares and used car prices.
An easing of the core, however, as well as bets that year-over-year comparisons for headline inflation will get easier over the coming months, could mean inflation pressures have peaked just at the right time: debate remain as to whether the U.S. economy has slipped into recession, given the strength of the labor market, and a slowdown in inflation prospects could compel the Fed to pause its rate hike cycle later in the autumn.
"Today’s numbers, then, will mark the end of the run of Fed-scaring gargantuan increases in the headline measure," said Ian Shepherdson of Pantheon Macroeconomics. "But we, and markets, ultimately are more interested in what happened in the core."
3. -- Twitter Sues Musk In Delaware For Backing Out of Takeover Deal
Twitter (TWTR) shares moved higher in pre-market trading after it sued billionaire Tesla (TSLA) CEO Elon Musk in a Delaware court for failing to complete his $44 billion takeover of the social media group.
Twitter accused Musk of secretly amassing shares prior to revealing his takeover ambitions in early April in order to buy it on the cheap, disparaging the group's leadership and technological nous and then attempting to walk away from his contractual obligations when the market turned against him.
"Musk apparently believes that he -- unlike every other party subject to Delaware contract law -- is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away," the Twitter suit read. "For Musk, it would seem, Twitter, the interests of its stockholders, the transaction Musk agreed to, and the court process to enforce it all constitute an elaborate joke."
The group has asked for a four-day hearing in early September, during which is hopes to convince the presiding judge to force Musk, by some measures the world's richest man, to complete the transaction at the proposed price of $54.20 per share.
Musk backed out of the deal last week, accusing Twitter of hiding the true extent of so-called 'bot' accounts on the platform and failing to co-operate with his requests to audit them.
Twitter shares were marked 0.97% higher in pre-market trading to indicate an opening bell price of $34.06 each.
4. -- Gas Prices Extend Declines Amid Crude Pullback, Americans Saving $140 Million A Day
U.S. gasoline prices fell to the lowest levels in more than a month Wednesday, extending their biggest run on declines in more than two years, as global crude markets continue to discount the prospect of a near-term recession.
Data from the AAA motor club indicates that U.S. gas prices eased to a national average of around $4.631 per gallon Wednesday, down more than 2 cents from Tuesday and the lowest in more than a month. Prices have now fallen for around 27 consecutive days, the longest streak of declines since the pandemic, and are well of the June all-time high of $5.107 per gallon - but are still some 47.2% higher than the same period last year.
Patrick De Haan, head of petroleum analysis at consumer advocate GasBuddy, estimates that the recent decline is saving Americans around $140 million a day in fuel costs as a result.
WTI crude futures for August delivery, the most tightly-linked commodity to U.S gasoline prices, were marked 96 cents higher on the session at $96.80 per barrel while Brent crude contracts for September delivery, the global pricing benchmark, rose $1.07 to change hands at $100.59 per barrel.
5. -- Delta Air Lines Earnings On Deck As Carriers Work To Match Soaring Demand
Delta Air Lines (DAL) shares bumped higher in pre-market trading as the carrier gets ready to kick-off the airline sector's second quarter earnings season later this morning.
Delta is expected to see revenues nearly double from last year's pandemic-hit spring to around $13.24 billion, swinging its bottom line into a profit of $1.66 per share.
Airline demand, however, is testing the capacity of Delta and its rival carriers as millions of travelers book flights and holidays and airline bosses struggle to kept pilots in planes amid staffing shortages that have persisted since the pandemic.
The U.S. Transportation Security Agency said that more than 2.4 million people passed through security checkpoints heading into the July 4 holiday weekend, the highest since 2019. Oil prices are also falling sharply, pulling U.S. crude to the lowest levels in three months and easing jet fuel costs for Delta and other carriers heading into the peak of the summer travel season.
