U.S. equity futures bumped higher Thursday, while Treasury yields held onto an overnight surge and the dollar raced to a sixteen month high against its global peers, as investors sifted through the impact of the fastest reading of U.S. inflation in more than 30 years.
October CPI was pegged at 6.2% by the Bureau of Labor Statistics, a 1990 high that not only roared past Street forecasts but also suggested the Federal Reserve may need to alter its course on both tapering and rate hikes if the price pressures don’t ease into early next year.
Still, with corporate profits continuing to impress, the all-important services portion of the economy running at a record pace and a trillion dollars in new infrastructure stimulus having passed President Joe Biden’s desk, investors appear content to drive stock prices higher heading into the start of trading Thursday.
“The Fed is already on a path to tapering their bond purchases and that is something they may need to accelerate as hiking rates sooner rather than later may be their best course of action if they want to stop inflation from getting entrenched,” said Independent Advisor Alliance CIO Chris Zaccarelli.
“We have already been positioning for higher inflation in our investments by using energy companies and higher quality companies — those with strong balance sheets, a competitive moat around their business and pricing power — as a way to lessen any impact that higher prices will have on profit margins.”
Sentiment, particularly in Asia, was also given a boost by reports that Evergrande Group, the indebted China-based property developer, scraped together payments of around $150 million to avert default on a series of offshore notes late Wednesday.
Futures contracts tied to the Dow Jones Industrial Average are indicating a 60 point opening gain while those linked to the S&P 500 are priced for an 18 point move to the upside.
Futures tied to the tech-focused Nasdaq Composite are indicating a 100 point advance even as benchmark 10-year Treasury note yields hold at 1.57% following last night’s surge. Bond markets will remain closed Thursday as part of the Veteran’s Day Observance.
The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.15% higher on the session at 94.974, just off the sixteen month high of $95.011 it hit earlier in the session following yesterday’s hotter-than-expected October inflation reading.
The dollar’s surge put a cap on oil price gains, which were also hit by concerns that faster inflation, and multi-year highs for gasoline prices, could compel President Joe Biden to order the release of crude from the Strategic Petroleum Reserve.
WTI futures for December delivery were marked 60 cents lower from last night’s close at $80.73 per barrel while Brent contracts for January, the global benchmark, slipped 47 cents to $82.17 per barrel.
Tesla shares were active in pre-market trading, rising 2.7% following Securities and Exchange Commission filings that revealed founder and CEO Elon Musk has sold around $5 billion in shares of the clean-energy carmaker over the past few days.
Another EV maker, Rivian Automotive , extended gains in pre-market trading following it debut on the Nasdaq that marked the biggest IPO of the year and lifted the value of the electric carmaker to more than $100 billion.
Walt Disney shares, meanwhile, fell 5% after the entertainment and media icon posted weaker-than-expected fourth quarter earnings and disappointing additions to its Disney+ streaming service.
Beyond Meat tumbled nearly 20% after the plant-based food producer posted disappointing third quarter earnings and a tepid sales outlook.
Honest Co. , the household and wellness company founded by Jessica Alba, gained more than 7% after posting third-quarter earnings that fell short of forecasts but sales that beat Wall Street estimates.
In overseas markets, Europe’s Stoxx 600 edged 0.12% higher by mid-day trading in Frankfurt while China’s bluechip CSI 300 closed 1.6% higher following reports of the Evergrande debt payment. Improved sentiment and a weaker yen helped the Nikkei 225 closed 0.6% higher in Tokyo at 29,277.86 points.
This article was originally published by TheStreet.