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US pre-open: Stocks to gain ahead of key inflation reading

By Michele Maatouk

Date: Wednesday 14 Feb 2018

US pre-open: Stocks to gain ahead of key inflation reading

(ShareCast News) - US futures pointed to another positive session on Wall Street on Wednesday, although there was some potential for volatility with the release of the latest inflation figures due before the opening bell.
At 1135 GMT, Dow Jones Industrial Average and Nasdaq futures were up 0.5%, while S&P 500 futures were 0.4% higher.

David Morrison, senior market strategist at GKFX, said: "Moves since Friday have seen US indices recover some lost ground following on from the correction that began a fortnight ago.

"However, traders are preparing themselves for the latest update on US CPI which will be released before the market open. After all, it was fears that an unexpected pick-up in wages would feed through to higher inflation that triggered the sell-off in the first place. US Treasury yields soared on the back of a sharp rise in average hourly earnings which raised concerns that the Fed would be forced to accelerate the pace of rate hikes this year."

Core CPI, which excludes food and energy, is expected to rise 1.7% compared with this time last year. If so, this would be a touch below last month's 1.8% reading and would probably be enough to calm investors' nerves. However, a reading of 1.8% or above has the potential to see equities and bonds sell off together, Morrison said.

"The expectation is that there won't be any nasty upside surprises from CPI this time round. The year-on-year comparison should be quite flattering due to a high reading for January 2017."

Traders will also be keeping a close eye on key technical levels, with the S&P 500 currently hovering around 2,670 - its 100-day simple moving average.

"A close above here opens up the possibility of a retest and break of resistance around 2,700, raising the probability of a resumption of the bull market. In contrast, a sell-off which sees the index break below 2,600 by the weekend would suggest that we're looking at something more damaging than a 10% correction," said Morrison.

The consumer price index for January is out at 1330 GMT, along with retail sales figures.

In corporate news, Fossil Inc was set to surge after the watch maker released better-than-expected earnings late on Tuesday.

Elsewhere, shares in Chipotle Mexican Grill were also likely to rise after it said Brian Nicol, who was chief executive of Taco Bell, will be its new CEO from March.

Hilton Worldwide Holdings, Molson Coors Brewing and Dr Pepper Snapple were among the companies slated to report ahead of the open.

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