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US stocks rally ahead of CPI data, China’s reopening continues to buoy commodities

bed & bath beyond

Wall Street extended gains one day ahead of the key CPI data as markets continued to bet on a further slowdown in inflation. The yearly US CPI printed at 7.7% and 7.1% in October and November, respectively. Consensus calls for a 6.5% increase in December, which will be the third consecutive cool-down in consumer prices if the data meets the expectation and the probability for a 50 basis-point rate hike by the Fed in February rose to 77%.

However, with China’s reopening, a surge in commodity prices may again lift inflationary pressure. Volatility is expected ahead throughout the rest of January. Company earnings will also be key to steer the market’s movements as the US earnings season kicks in with big banks reporting their final quarter performance before the US market opens on Friday.

Futures point to a higher open across the Asian equity markets following the broad-based rally. ASX futures were up 0.80%, Nikkei 225 futures rose 0.42% and Hang Seng Index futures advanced 1.04%. 

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  • All three US benchmark indices finished higher amid a broad-based rally, and all the 11 sectors in the S&P 500 finished higher, with Real Estate (+3.59%) and Consumer Discretionary (+2.68%) leading gains. The Technology and Communication Services were also strong as most big tech shares were higher, with Amazon jumping 5.8%, and Alphabet up 3.5%.
  • Bed & Bath Beyond surged for the third straight trading day, up 53%, lifting other meme stocks, such as AMC Entertainment and GameStop, up 16% and 5%, respectively. The retailer reported disappointing fiscal third-quarter results and announced a potential bankruptcy due to a sales decline. The company also plans to cut more jobs to reduce costs in order to stay in business.
  • Crude oil prices jump more than 3% on China’s buying spree ahead of the Chinese Luna new year and hope for a third consecutive drop in the US CPI data. On the other hand, the US crude inventories rose about 18 million barrels last week, well above an estimated draw of 2.2 million but this may have been priced in due to an anticipated refining freeze at the US Gulf Coast. The WTI futures are still moving in a downtrend since a price peak in June, with $70 a pivotal support in the near term.
  • Base metals continued to soar amid China’s reopening, with copper futures up 2. 6% and Iron ore up 1.25%. A softened US dollar has also helped the surge in commodities lately, buoying Australian miners, such as BHP, Rio Tinto, Pilbara minerals and Core Lithium were all up between 1-2% on Wednesday. 
  • Cryptocurrencies were flat in the last 24 hours, with Bitcoin up 0.45% to just above 17,500 and Ethereum up 0.1% to above 1,340, respectively. The world-largest crypto exchange, Binance, plans to expand its workforce by 15%-30%, opposite of the other industrial players, such as Coinbase which cuts jobs. FTX has reportedly recovered $5 billion worth of liquid assets.

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