Wall Street Stock Futures Rise Amid Deflation in China

Stock-Index Futures Trading Update

• S&P 500 futures (ES00) rose 12 points, or 0.3%, to 4531
• Dow Jones Industrial Average futures (YM00) added 62 points, or 0.2%, to 35457
• Nasdaq 100 futures (NQ00) gained 58 points, or 0.4%, to 15412

On Tuesday, the stock market saw a decline with the Dow Jones Industrial Average (DJIA) falling 159 points, or 0.45%, to 35314. The S&P 500 (SPX) declined by 19 points, or 0.42%, to 4499, and the Nasdaq Composite (COMP) dropped 110 points, or 0.79%, to 13884.

This marks the fifth drop in six sessions for the S&P 500.

Key Market Drivers

News of falling consumer prices in China, which witnessed a 0.3% decline for the year up to July, aligns with the country’s weak trade data released this week. These developments raise concerns about the faltering growth in the world’s second-largest economy.

According to Steve Clayton, Head of Equity Funds at Hargreaves Lansdown, “China is now experiencing a significant slowdown in its economy, indicated by the actual cost of goods falling both in stores and at the factory gate. This slowdown is exacerbated by high levels of indebtedness.”

The market continues to absorb this information while looking ahead to U.S. price data.

Markets Find Mildly Positive Mood as Inflationary Pressures Subside

Traders are noting that deflationary pressures originating from China may contribute to a reduction in goods inflation in the US and other countries. This development is seen as potentially helping central banks to halt the rise in borrowing costs. Investors are responding positively to this news, as stocks have rebounded from Tuesday’s lows. The upcoming release of the US consumer price index data on Thursday and producer prices on Friday is also eagerly anticipated.

Reverting Risk-Off Trade as Investors Await US CPI

According to Stephen Innes, managing partner at SPI Asset Management, markets are displaying caution leading up to the US CPI release. Traders are reverting the risk-off trade that dominated overnight markets after another storm passed. However, much of this movement is likely due to pre-US CPI adjustments. Historically, stocks, bonds, and currency markets exhibit volatile reactions to CPI beats and misses.

European Markets Boosted by Italian Bank Performance

Positive sentiment is bolstered by a stronger showing in Europe, where Italian banks experienced notable gains following Rome’s decision to dilute its windfall tax proposals.

Corporate Earnings Season Continues

The second quarter corporate earnings season is ongoing, with companies such as Roblox, Penn Entertainment, Wynn Resorts, and Walt Disney presenting their financial results. Penn Entertainment stock surged after reaching an agreement on a sports-bet partnership with Disney’s ESPN.