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CPI ahead, Fed minutes, Delta Air Lines to report - what's moving markets

Published 10/10/2024, 03:35 AM
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Investing.com -- Futures on Wall Street tick down ahead of the latest US inflation reading and a raft of corporate earnings. Economists predict that the pace of headline price growth eased closer to the Federal Reserve's 2% target level in September. Elsewhere, minutes from the Fed's meeting last month show that a "substantial" majority of members backed a 50-basis point interest rate cut, although some officials flagged reservations about the larger size of reductions.

1. Futures lower

US stock futures edged mostly lower on Thursday as investors took caution ahead of a slew of new economic data and corporate earnings.

By 03:30 ET (07:30 GMT), the Dow futures index had edged down by 26 points or 0.1%, S&P 500 futures had slipped by 7 points or 0.1%, and Nasdaq 100 futures had shed 27 points or 0.1%.

The main averages on Wall Street ended the prior session in positive territory, buoyed in part by minutes from the Fed's September meeting (more below).

In individual stocks, shares in Alphabet (NASDAQ:GOOGL) pared back some losses posted after the US Department of Justice indicated in court filing that it may ask a US judge to break up parts of giant Google search business.

2. CPI ahead

Markets will have the chance to parse through fresh inflation data on Thursday that could factor into how the Fed approaches its upcoming policy decisions.

Economists expect the consumer price index (CPI), a crucial gauge of US headline inflation, to have slowed to 2.3% on an annualized basis in September, down from 2.5% in August. Month-on-month, the figure is seen decelerating to 0.1% from 0.2%.

So-called "core" CPI, which strips out more volatile items like food and fuel, is tipped to match August's pace of 3.2% over the past 12 months and ease slightly to 0.2% on a monthly basis.

Elsewhere, weekly first-time claims for unemployment benefits are forecast to edge up to 231,000 from the prior reading of 225,000, although it remains to be seen how the number could be impacted by the recently devastating Hurricane Helene in the US Southeast and ongoing strikes at aerospace group Boeing (NYSE:BA).

Following a blockbuster jobs report last week, hopes have been bolstered that the Fed can achieve a "soft landing" for the US economy, in which a period of elevated inflation is successfully quelled without sparking a meltdown in the labor market or broader activity.

3. "Substantial majority" of Fed members backed jumbo cut in September - minutes

A "substantial majority" of Fed officials supported bringing interest rates down by half a percentage point at their Sept. 17-18 meeting, according to minutes from the gathering.

But there was still some division over the size of the reduction, with one of the 12 members of the central bank's rate-setting committee -- Fed Governor Michelle Bowman -- dissenting against the move in favor of a more traditional quarter-point cut.

The minutes indicated that an unspecified number of policymakers also thought a smaller reduction could have been warranted, citing indications of job market resilience and concerns that inflation lingers above the Fed's target level.

However, Fed officials appeared to agree that the 50-basis point cut does not necessarily point to a specific path ahead for rate reductions.

Traders are pricing in about an 85% chance the Fed slashes rates by another 25 basis points at its November meeting, the CME Group's (NASDAQ:CME) FedWatch Tool showed. Meanwhile, there is about a 15% probability that borrowing costs are left unchanged at the current range of 4.75% to 5.00%.

4. Delta Air Lines to report

Third-quarter earnings season for US airlines is due to kick into gear this week, beginning with results from Delta Air Lines (NYSE:DAL).

The Atlanta-based company reported record revenue in its June quarter of $15.4 billion, although the figure was slightly below Wall Street estimates, as a boom in summer travel led to overcapacity that put downward pressure on fares.

Chief Executive Ed Bastian moved to reassure investors at the time that the firm's pricing power will increase "significantly" from August onwards.

Analysts at Bank of America Securities said they expect seat growth capacity will continue to be a major focus when Delta reports on Thursday.

"While [Delta] may be inclined to guide conservatively ahead of its [Nov. 20] investor day, we continue to see a constructive industry backdrop as [...] demand for air travel remains stable, [...] capacity growth continues to moderate, [...] and airlines are likely to see the greatest benefit of recent fuel price declines in [the fourth quarter]," the BofA analysts wrote in a note to clients earlier this week.

5. Crude gains as Milton barrels into Florida

Oil prices rose Thursday as Hurricane Milton hit Florida hard, adding to worries about potential supply disruptions in the Middle East.

By 03:31 ET, the Brent contract climbed 0.7% to $77.09 per barrel, while U.S. crude futures (WTI) traded 0.7% higher at $73.77 a barrel.

Both contracts have fallen around 5% over the last two sessions.

In the US, Hurricane Milton has made landfall in Florida, and while the storm has largely dodged the oil infrastructure in the Gulf of Mexico it has already driven up demand for gasoline in the state, which has helped support crude prices.

Additionally, traders remained on edge over a potential escalation in the conflict in the Middle East, especially if Israel targets Iran’s oil facilities.

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