Dow Futures Up 60 Pts; June CPI Release in Spotlight

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Dow Futures Up 60 Pts; June CPI Release in Spotlight

By Peter Nurse    

Investing.com -- U.S. stocks are seen opening with small gains Wednesday ahead of the release of highly-anticipated inflation data which could influence future Federal Reserve policy.

At 07:00 AM ET (1100 GMT), the Dow Futures contract was up 60 points, or 0.2%, S&P 500 Futures traded 8 points, or 0.2% higher, and Nasdaq 100 Futures climbed 37 points, or 0.3%.

The consumer price index for June is scheduled for release at 08:30 AM ET (1230 GMT), and is expected to show year-on-year growth of 8.8%, up from May’s 8.6% reading, which itself was the biggest increase since 1981.

Investors are looking for signs that the red-hot inflation is beginning to slow in the wake of monetary tightening by the Federal Reserve. This could be seen in the core inflation release, which excludes volatile energy and food prices, and is expected to come in at 5.7% on the year, down from 6.0% in May.

A lofty CPI number is likely to prompt the Fed to hike by another 75 basis points when it meets later this month, even if it runs the risk of forcing the world’s largest economy, and main global growth driver, into recession.

The consumer price index is hitting just as corporate earnings start to pour out for the second quarter, with expectations already wary for corporate outlooks.

A weaker second-quarter earnings scenario has largely been factored in, according to strategists at Deutsche Bank, and historical data suggests that the market usually rallies during earnings season after a selloff. 

“We think it is unlikely the market sells off further merely on weaker earnings or guidance cuts as those are now widely expected,” Deutsche Bank said, in a note. “The market has usually (75%) rallied during earnings season, especially following a selloff and when investor positioning is very low going into the earnings season as is the case presently.”

Delta Air Lines (NYSE: DAL ) reports numbers before the bell Wednesday, and Reuters reported that the U.S. carrier is in talks with European planemaker Airbus (EPA: AIR ) to expand its existing order for A220 small jetliners.

Oil prices edged higher Wednesday, clawing back some of the previous session’s losses, but gains were tempered by a U.S. supply report showing rising inventories and a cautious outlook from the International Energy Agency.

The IEA lowered its outlook for oil demand growth over the next two years, by 100,000 barrels per day in both years, citing a negative impact from soaring prices and fears of a potential economic slowdown.

U.S. crude stocks rose by about 4.8 million barrels for the week ended July 8, according to Tuesday’s data from the industry body American Petroleum Institute , exacerbating fears of a wobble in oil demand.

The official government inventory report is due later Wednesday.

By 07:00 AM ET, U.S. crude futures traded 0.6% higher at $96.44 a barrel, while the Brent contract traded 0.5% higher at $100.00. Both contracts fell by more than 7% on Tuesday, falling through $100 a barrel for the first time since April.

Additionally, gold futures rose 0.2% to $1,727.45/oz, while EUR/USD traded 0.1% lower at 1.0027.

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