US Futures Slip as Markets Await Key Inflation Data and Earnings Reports

Contracts linked to the S&P 500 fell by 0.2%, following a record high earlier this week. At the same time, 10-year Treasury yields remained above 4%, near their highest levels since late July. The U.S. dollar remained stable, maintaining its recent strong performance.

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The upcoming U.S. consumer price data for September is expected to reflect a further slowdown in inflation, supporting the view that the Federal Reserve may continue its easing policy. However, a strong job market report from the previous month has caused traders to reconsider the likelihood of aggressive rate cuts, with many anticipating a potential 25-basis-point reduction in November.

Potential Impact of Inflation Data on Markets

Analysts suggest that stronger-than-expected inflation numbers could prompt a different response from the Federal Reserve, potentially slowing or halting further rate cuts. With U.S. equity markets near all-time highs and European markets close to multi-year peaks, there are concerns that rising inflation could trigger market declines if not addressed quickly.

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Corporate Earnings Season Begins

The third-quarter earnings season has begun, with Delta Air Lines Inc. posting weaker-than-expected profit and sales forecasts. Major financial institutions like JPMorgan Chase and Wells Fargo are set to report their earnings by the end of the week. Investors will be closely watching to see if corporate profits can sustain the significant rally in the S&P 500, which has gained around 20% this year.

Despite cautious expectations, many analysts predict that companies will outperform the pared-back forecasts. Corporations within the S&P 500 are anticipated to post a 4.7% increase in quarterly earnings compared to last year, though this is a decline from the previous projection of 7.9% growth. Investors remain optimistic, given that inflation and interest rates appear to have peaked, creating a favorable backdrop for stocks.

Market Movements in Focus

In premarket trading, U.S. insurance stocks gained as Hurricane Milton weakened, while shares of supply chain services provider GXO Logistics surged on the news of a potential sale. Conversely, some pharmaceutical stocks slipped after executives from a major firm chose not to participate in activist actions against the company.

Global Markets and Commodity Prices

European markets showed little movement, with most indexes remaining steady. Oil prices rose, with Brent crude climbing above $77 per barrel, driven by concerns about potential geopolitical tensions in the Middle East. Investors are particularly focused on the possibility of further conflicts in the region, which could disrupt global energy supplies.

Key Events to Watch This Week:

• Thursday: U.S. Consumer Price Index (CPI) report and jobless claims data, providing further insights into inflation trends.

• Friday: Corporate earnings reports from major U.S. banks, alongside Producer Price Index (PPI) data and consumer sentiment indicators.

• Federal Reserve Watch: Speeches by key Fed officials will offer additional clues about the central bank’s policy outlook in the months ahead.

Market Overview:

• Stocks: S&P 500 futures fell 0.1%, while Nasdaq 100 futures slipped 0.2%. The Dow Jones futures remained relatively unchanged.

• Currencies: The U.S. dollar held its strength, while the euro and British pound remained steady. The Japanese yen made slight gains.

• Cryptocurrencies: Bitcoin rose by 1.3%, and Ether saw a 2.1% increase.

• Bonds: U.S. 10-year Treasury yields climbed to 4.09%, with similar upward moves in bond yields across Europe.

• Commodities: Oil prices strengthened, with West Texas Intermediate (WTI) crude up 1.2%, and spot gold gained 0.2%, indicating increased demand for safe-haven assets.

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