Investing.com — Wall Street is seen trading slightly lower Wednesday ahead of the release of key inflation data, which could guide future Federal Reserve policy.
1. US CPI looms large
The week’s most eagerly anticipated economic indicator is set to arrive later in the session, with the US set to publish November data on consumer price inflation.
This will provide Federal Reserve officials with a last look at price pressures ahead of their final policy meeting of the year next week.
The report is expected to show that the headline annual number rose to 2.7% in November, above the 2.6% the prior month, a monthly rise of 0.3%. The ‘core’ figure, which excludes volatile food and energy components, is expected to come in at 3.3%, unchanged from October, also up 0.3% on a monthly basis.
Markets head into the release of the data expecting numbers around these levels won’t get in the way of another interest rate cut of 25 basis points at the December 17-18 meeting.
The Fed has already cut interest rates by 75 basis points since September, and markets head into the release expecting numbers around these levels won’t get in the way of another interest rate cut of 25 basis points at the December 17-18 meeting.
However, concerns over a potential revival in inflation have also returned to the fore because of President-elect Donald Trump’s plans to raise tariffs on imports, and any indication that progress in returning inflation to the Fed’s 2% target has stalled would likely see markets revise expectations.
Even a core reading of 0.3% would put the three-month annualised rate around 3.6%, which is uncomfortably high, and so a higher reading might give pause to bets on a December cut.
2. Futures largely flat; Alphabet in focus
US stock futures were little changed Wednesday, with investors cautiously awaiting the release of the latest consumer inflation data for a steer towards future Federal Reserve monetary policy.
By 04:00 ET (09:00 GMT), the Dow futures contract was down 17 points, or 0.1%, while S&P 500 futures climbed 7 points, or 0.1%, and Nasdaq 100 futures rose by 33 points, or 0.2%.
The major indices fell Tuesday, marking the second straight losing day for the S&P 500 and Nasdaq Composite and the fourth negative session in a row for the Dow Jones Industrial Average.
Activity will likely be impacted by the release of the November US consumer price index report later in the session, as this could influence the Federal Reserve’s thinking at its meeting next week.
On the corporate earnings front, Adobe (NASDAQ:ADBE) will release its results after the bell, while Google owner Alphabet will be in the spotlight after the tech giant announced a new breakthrough in quantum computing, which could herald a sharp increase in computing speeds.
3. China’s two-day policy meeting
China kicks off a two-day annual meeting of Communist Party leaders from Wednesday, with the conference expected to provide more cues on the country’s plans for stimulus.
The Central Economic Work Conference begins Wednesday, with an announcement expected after the conclusion of the conference on Thursday.
The conference is a meeting of China’s top decision-making bodies – the Central Committee of the CCP, and the State Council of the People’s Republic of China.
Chinese top leadership surprised the market Monday by signaling a shift in its monetary policy stance after 14 years, stating that policy next year will be “moderately loose” instead of “prudent” — a phrase they haven’t used since the depths of the global financial crisis in 2008.
Of particular note was officials’ explicit mention of measures to boost private spending and local demand, which have both been a major headwind for the Chinese economy in recent years.
4. Google unveils important new chip
Alphabet’s (NASDAQ:GOOGL) stock soared on Tuesday, and is set to rise once more Wednesday, after the Google parent unveiled a new generation chip that the company said helped overcome a key challenge in quantum computing.
Google introduced a new chip called Willow earlier in the week, adding that its technology can reduce expected errors faster than they appear as quantum chips get bigger, which has been a bottleneck in the development of better quantum computers.
“We see Willow as an important step in our journey to build a useful quantum computer with practical applications in areas like drug discovery, fusion energy, battery design + more,” Google CEO Sundar Pichai said on X.
Alphabet’s stock has risen over 30% so far this year.
5. Oil boosted by Chinese stimulus optimism
Crude prices rose Wednesday, with traders looking for more economic stimulus from China, the world’s largest crude importer.
By 04:00 ET, the US crude futures (WTI) gained 0.6% to $68.98 a barrel, while the Brent contract rose 0.5% to $72.53 a barrel.
Chinese authorities have pledged to enact more targeted stimulus measures to boost economic growth, ramping up hope that oil demand will recover.
Trade data also showed a sharp increase in Chinese oil imports through November – the first annual growth in seven months.
However, gains have been limited by industry data showing that US oil inventories unexpectedly grew in the week to Dec. 6, raising concerns that demand will dwindle further in the winter season.
Official data, from the Energy Information Administration, is due later on Wednesday.
The Organization of Petroleum Exporting Countries is expected to release its monthly report later in the session, after the cartel had last week agreed to extend its current run of supply cuts until the second quarter of 2025.
