US Stocks Brief: S&P Futures Remain Flat Amid Hot Inflation Data and Rate Cut Uncertainty.

US stocks futures were flat to slightly higher as investors digested hot producer inflation data that reversed rate-cut bets. The S&P 500 hit another closing high, while the Nasdaq retreated from its record rally. Kyivstar CEO said a Russia-Ukraine peace deal would boost the company's value after its historic US listing. Vyome Therapeutics completed its merger with ReShape Lifesciences, and Associated British Foods snapped up Hovis Group.

US stock futures were largely flat to slightly higher on Thursday as investors digested the latest Producer Price Index (PPI) inflation data, which reversed optimism around a large September rate cut. The major indices wavered throughout the session, with the Dow Jones Industrial Average (^DJI) closing down slightly, while the S&P 500 (^GSPC) rose marginally to notch its third consecutive record close. The tech-heavy Nasdaq Composite (^IXIC) closed just below its record high [1].

The July PPI data showed month-over-month prices rising 0.9%, far exceeding expectations of 0.2%, and an annual increase of 3.3%, the highest since February. Core producer prices, which exclude food and energy, saw the largest increase in three years [1]. This hotter-than-expected inflation print cooled the enthusiasm for a September rate cut, as traders had fully priced in a cut, even as some Fed policymakers urged patience. By Thursday, nearly 10% of traders were pricing in a rate hold, and bets on a "jumbo" 50-basis-point cut evaporated [1].

The inflation shock sapped some of the momentum from the roaring market this week. Stocks extended their rally on Wednesday, pushing the S&P 500 and Nasdaq to consecutive record highs. Bitcoin (BTC-USD) also benefited from mounting rate-cut bets, reaching a new record high before rolling over [1]. Friday's retail sales reading will serve as this week's final key economic data point [1].

In corporate news, cryptocurrency exchange operator Bullish (BLSH) rose 10% on Thursday, hovering around $75, about double its value. Intel (INTC) shares jumped 7% after Bloomberg reported that the Trump administration is considering taking a stake in the US chipmaker [1].

September S&P 500 E-Mini futures (ESU25) are trending up +0.24% this morning, extending yesterday’s gains as growing expectations for Federal Reserve interest rate cuts fueled risk-on sentiment. The U.S. Bureau of Labor Statistics report released on Tuesday showed that consumer prices rose +0.2% m/m in July, in line with expectations. On an annual basis, headline inflation rose +2.7% in July, the same as the previous month and slightly weaker than expectations of +2.8%. The core CPI, which excludes volatile food and fuel prices, rose +0.3% m/m and +3.1% y/y in July, compared to expectations of +0.3% m/m and +3.0% y/y [2].

Richmond Fed President Tom Barkin said on Tuesday that uncertainty about the U.S. economy’s trajectory is easing, but it remains unclear whether the central bank should place greater focus on curbing inflation or supporting the labor market. Kansas City Fed President Jeff Schmid supports holding interest rates steady for now to prevent strong economic activity from adding to inflation pressures [2].

US rate futures have priced in a 96.2% chance of a 25 basis point rate cut and a 3.8% chance of no rate change at the conclusion of the Fed’s September meeting. Today, investors will hear perspectives from Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee, and Atlanta Fed President Raphael Bostic [2].

References:
[1] https://finance.yahoo.com/news/live/stock-market-today-dow-sp-500-nasdaq-hit-pause-as-hot-ppi-inflation-data-cools-rate-cut-rally-200121495.html
[2] https://finance.yahoo.com/news/p-futures-gain-fed-rate-101255738.html