Dow Futures Rise Amid Debate on Inflation’s Path — and What Else Is Happening in the Stock Market Today

Stocks point higher on further signs that U.S. inflation has been cooling.


Michael Nagle/Bloomberg

Stock futures traded higher Friday amid more signs that inflation in the U.S. has been cooling.

Contracts linked to the


Dow Jones Industrial Average

rose 116 points, or 0.4%, to 33,420,


S&P 500

futures were up 0.4% and


Nasdaq

futures gained 0.5%.

Stocks couldn’t extend their rally Thursday even as data showed that inflation at the wholesale level rose in July but below economists’ expectations. That followed by a day a report that revealed slower-than-expected inflation at the consumer level. The reports gave rise to the belief that U.S. inflation may have peaked, allowing the Federal Reserve to be less aggressive when increasing interest rates to slow the economy.

“The data keep piling up that the corner has been turned on inflation,” said Jamie Cox, managing partner at Harris Financial Group. “The Federal Reserve no longer needs to apply emergency brake monetary policy, and that’s a good thing. Soft landing runway is in sight.”

However, San Francisco Fed President Mary Daly said the central bank’s fight against rising inflation wasn’t over. She told Bloomberg Television that inflation data for July are “significant in that they are saying that we’re seeing some improvement but they’re not victory.”

Daly added her base case calls for an interest-rate hike of 50 basis points when the Fed next meets in September, following the last two more aggressive rates boosts of 75 basis points. But the Fed president told Bloomberg she hasan “open mind” if the data point to another large increase being necessary.

John Lynch, chief investment officer at Comerica Wealth Management, said while he was encouraged by the moderation in pricing pressures, “investors must recognize the Fed’s challenge in reducing inflation.”

Lynch said that “simply shifting to a pattern of 50 basis points [interest rate hikes] doesn’t eliminate the risk to the economy or the financial markets.”

The CME FedWatch tool indicates that a majority of investors, 59.5%, are anticipating the Fed will boost rates by 0.5 a percentage point in September. The probability for a rate hike of 0.75 a percentage point was at 40.5%. The probabilities were more or less reversed earlier in the week before the inflation data were issued.

Economic data to be released Friday include a preliminary reading on consumer sentiment for August, which could further clarify how consumers are feeling about rising prices.

Write to Joe Woelfel at joseph.woelfel@barrons.com

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