Stock futures in the United States rose Thursday morning as investors awaited a new reading on weekly jobless claims and retail price inflation from Washington.
The Labor Department's weekly jobless claims data for the previous week revealed an unexpected increase in first-time unemployment filings, which increased to 230,000. Nonetheless, this remained close to pre-pandemic levels, with continuing unemployment claims falling to their lowest level since 1973. At the same time, the Bureau of Labor Statistics' December producer price index (PPI) indicated a 9.7% year-on-year rise in wholesale prices for the end of the previous year, the most significant year-on-year increase since records began in 2010.
Traders were also digesting a scorching report on consumer price inflation from the beginning of this week. This revealed another record high pace of price hikes, just one day after the Fed Chairman Jerome Powell signaled in his reappointment hearing that the central bank would act as required to calm increasing prices. According to the Bureau of Labor Statistics' December CPI), the cost of products climbed at a 7.0% year-on-year pace at the end of this year, the highest rate in 40 years.
Comerica Wealth Management chief investment officer John Lynch believes the 7% reading has been priced into the stock markets, although she adds that CPI has a bit further to go before it reaches peak levels.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, agreed that the pace of price rises should slow beginning in the middle of 2022. However, CPI could hit 7.2% in January and February before slowing.
"The streak of huge gains is finished, and it will begin to decrease in March," he stated, forecasting a 4.5% reading in September.
Before markets open, the Labor Department will issue the most recent weekly unemployment claims numbers. According to consensus analyst projections, new claims for unemployment insurance would rise slightly from the previous week, but gold will remain around pre-COVID low points.
"Persistently high inflation rates, along with recently robust labor market statistics, bolster the Federal Reserve hawkish rhetoric," Christian Scherrmann, DWS Group's U.S. economist, noted. "Thinking forwards, Omicron appears to be dictating the destiny of the economy in January and possibly February, but current indications on how the new strain plays out imply that the Federal Reserve will remain focused to start reducing its accommodative monetary policy, probably as early as March 2022, by raising rates for the first time since December 2018."
Banks are set to publish fourth-quarter profit data on Friday, as profits season begins to round up the week. The S&P 500 Financials sector exchange-traded fund XLF established a new intraday peak on Wednesday, its fourth in eight-session in 2022, as traders prepare for quarter releases from BlackRock (BLK), Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) (WFC).
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