Dow futures fell 300 points after a hot inflation report

CPI unexpectedly rose month over month in August Even with lower gas prices, the Bureau of Labor Statistics reported.

The index is up 0.1% for the month and is up 8.3% year over year. Economists polled by Dow Jones had expected a monthly decline of 0.1%.

Core CPI, which strips out volatile food and energy costs, was up 0.6% from July and 6.3% year over year.

– Jeff Cox

The surprisingly hot CPI report led to a quick reversal in stock futures. Dow futures, which rose more than 200 points shortly before 8:30 a.m., fell more than 300 points after the release. Nasdaq 100 futures saw a negative swing of about 3%.

– Jesse Pound

According to Bernstein, economic headwinds and investor pessimism present downside risks for stocks, especially in Europe.

Strategists Sarah McCarthy and Mark Diver said in a note to clients on Tuesday that earnings estimates in Europe could fall another 10% or more, putting pressure on stocks.

“European market is up 4% since the beginning of September, but down 13% year-to-date (in terms of local currency). We expect further declines in the short term as in our view a) the earnings-cutting cycle should continue b) Expect more outflows from equity funds Sentiment measures are not pessimistic enough yet to take a bullish stance on positive short-term returns.

Europe is not the only region showing weakness. Bernstein’s note also mentioned that global equity funds have seen three consecutive weeks of outflows.

– Jesse Pound and Michael Bloom

US Treasury yields They were down on Tuesday morning Less than an hour before the release of the main inflation report.

return on standard 10-year treasury bonds The two-year Treasury notes are down about 5 basis points each, trading at 3.314% and 3.525%, respectively. return on Treasury bonds were for 30 years down about 4 basis points at 3.477%.

Bond yields move opposite the price, and the basis point is 0.01%.

Treasury yields soared in September as Federal Reserve officials vowed to continue their war against inflation even if it causes short-term damage to the economy.

– Jesse Pound

Barclays downgraded Rent the Runway’s stock to “neutral” instead of above, citing concerns about the growth of the company’s active subscribers.

“The significant deterioration in active customer trends in the quarter (sub-active growth slowed q-o-q to -8% in Q2 vs. Street +7%, slowing from +17% in Q1) suggests that rent is more vulnerable to overall consumer pressure. ambition than we expected,” Analyst Michael Bennetti wrote in a note.

Shares of Rent the Runway plunged more than 22% in the primary market after the company announced it was laying off 24% of its workforce.

– Sarah Min

dollar index, which measures the performance of the US currency against six others, fell for the fifth day in a row, which could give stocks a boost. Many large US companies get a significant portion of their revenue from outside the US, which means that a weaker dollar could boost their revenues.

The index traded 0.5% lower at 107.76.

BYDa Chinese electric car maker, could make significant gains in the future, according to Barclays.

BYD (Make Your Dream) became the world’s No. 1 electric car maker in terms of deliveries in 2Q22, dumping Tesla from that base for the first time, and its triple-digit revenue growth will likely continue for the rest of 2022, although the analyst wrote. Jeong Chao in a note on Tuesday “really big base.”

The analyst also has a target price of $40 per share, indicating a 38% rise from Monday’s close.

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– Sarah Min

The UK unemployment rate fell to 3.6% in the three months to July, its lowest level since 1974.

Meanwhile, the economic inactivity rate rose 0.4 percentage points to a five-year high of 21.7%.

The Office for National Statistics attributed the change to an increase in long-term sickness appointments and students leaving the job market. The increasing tightening of the labor market may increase inflationary pressure and cause headaches for Bank of England.

Annual growth in real wages – factoring in inflation – excluding bonuses fell 2.8% in the three months to the end of July.

“It is understood that people will look to their employers for help during the cost-of-living crisis, while Andrew Bailey is hopeful that companies will not raise their salaries too quickly and compound inflation,” said Marcus Brooks, chief investment officer at Quilter Investors.

“However, the UK must brace for discontent among the public sector as payroll strikes continue as budgets are drained.”

– Elliot Smith

UBS The Swiss bank said Tuesday that the group intends to increase its dividend by 10% to $0.55 per share, and expects its stake buybacks in 2022 to exceed $5 billion.

UBS shares were signaled to rise 1.2% in pre-market activity after what ZKB analyst Michael Klein called the surprising news.

Read more here.

– Reuters

European shares rose cautiously on Tuesday morning as global markets braced for the latest reading of US inflation.

pan europe Stokes 600 It rose 0.3% in early trade, with food and beverage stocks adding 0.8% to lead the gains as most major sectors and stock exchanges headed into positive territory. Retail stocks fell 0.4%.

Real estate investment trusts – or REITs – are back in the spotlight after a volatile year for many asset classes.

Analysts from Morgan Stanley and Citi are highlighting REITs from two sectors that they say can outperform the broader market, and remain resilient in a recession.

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– Weezin Tan

The upcoming Federal Reserve meeting in September, when the central bank is expected to raise interest rates, will likely have already priced in the market, according to Ameriprise chief market strategist Anthony Saglimpin.

“From our point of view, this month’s central bank actions are likely to be inappropriate for asset prices,” he wrote in a note on Monday. “However, incoming economic data over the coming weeks and months and its impact on policy actions next year could play a more important role in shaping the direction of stocks in the medium term.. “

Markets are now expecting the Fed to raise rates by 0.75 percentage points, which means assets may not move much if that is the central bank’s decision. Tuesday’s CPI report in line with expectations may also not move the needle.”

“Unless last month’s inflation numbers change significantly more than expected, including Wednesday’s update to August’s PPI, we believe a 75 basis point Fed hike is basically insured at this point,” he said.

– Carmen Renick

The recent rally in stocks is likely to be another bear market bounce and investors should prepare for more volatility ahead, according to Wells Fargo.

“The year of execution, defensive outperformance, high shareholder payouts, and high-quality, low-value stocks remind investors of the hallmark of a bear market,” Zhao Ma, a global portfolio and investment strategist, wrote in a note Monday.

They added that such recoveries occur in almost every bear market and many of them reverse quickly, leaving investors with regret.

“Although a bear market bottom is difficult to anticipate, in the past, market bottoms were usually preconditioned by excessively pessimistic market sentiment and a sign of eventual improvement in the underlying economic or market issue,” Ma said. “We think we’re not there yet in either respect.”

In the meantime, Ma recommends investors look for defensive stocks with low volatility, high earnings and share repurchase returns. He also says that investors should look for high-quality names with profitability, leading market share, and reasonable market prices.

– Carmen Renick

US stock futures rose on Monday night as Wall Street looked ahead to the August CPI report due to be released on Tuesday morning. The report will give investors an update on the state of inflation in the US and is one of the last data the Federal Reserve will see before its September meeting.

Dow Jones Industrial Average futures rose 55 points, or 0.17%. S&P 500 and Nasdaq 100 futures rose 0.18% and 0.21%, respectively.

– Carmen Renick