By Geoffrey Smith
Investing.com -- U.S. consumer price inflation is set to reach a new 4-decade high in January, but it's still not clear that that will prompt a 50 basis-point rate hike from the Federal Reserve in March. Consumer giants Coke, Pepsi, Unilever (NYSE:UL), Philip Morris (NYSE:PM) et al will also give their company-level take on where prices are heading. Walt Disney (NYSE:DIS) stock and Uber (NYSE:UBER) stock are flying after strong quarterly growth numbers. Stocks are set to trade sideways until the big release (which will also be accompanied by jobless claims for last week). And oil resumes its upward march after the biggest weekly drop in U.S. crude stocks in four months. Here's what you need to know in financial markets on Thursday, 10th February.
1. Inflation - the macro and the micro
The U.S. releases inflation data for January at 8:30 AM ET (1330 GMT), with the annual headline rate set to hit another 4-decade high of 7.3%.
So much for the sensationalism. The CPI continues to be distorted by things such as used car prices and fuel oil prices, which is why the Federal Reserve prefers to track the price index for Personal Consumer Expenditures (also currently at multiyear highs).
It’s doubtful whether even an upside surprise will stampede the Fed into a 50 basis point hike in March: Cleveland Fed President Loretta Mester played down such a step on Wednesday, while Atlanta’s usually-hawkish Raphael Bostic said the inflation rate was “on the cusp” of turning.
For a holistic perspective on inflation, it may make more sense to look at what consumer giants such as Unilever, Coke, Pepsico (NASDAQ:PEP), Philip Morris and the strike-hit Kellogg (NYSE:K) say about prices in their quarterly reports today. And don’t forget to check out weekly jobless claims numbers, also due at 8:30 AM ET.
2. Disney, Uber gain as pent up demand is unleashed
Disney and Uber chose a good moment to report strong quarterly revenue growth at a time when the market started to think that it may have overdone the pessimism on long-duration growth stocks.
As such, both stocks are flying in premarket, even though Uber’s forecasts for the current quarter were below market consensus, and Disney confirmed that the unit that houses its streaming service Disney+ lost nearly $600 million in the last quarter as it pursued growth at any cost. At least it delivered the growth, adding a net 11.8 million subscribers, way more than expected (and more than Netflix (NASDAQ:NFLX)). The theme parks business also had a banner quarter as pent-up demand was unleashed.
Uber meanwhile managed to post a net profit due to gains on its equity investments. It’s also continuing to see strong growth in its food delivery business, despite the reopening of restaurants.
3. Stocks set for mixed open; earnings deluge to continue
U.S. stocks are set to give up some of Wednesday’s sharp gains at the open, with few people willing to make large bets ahead of the key inflation numbers later.
By 6:20 AM ET, Dow Jones futures were up 46 points or 0.1%, while S&P 500 futures were down 0.1% and Nasdaq 100 futures were down 0.3%. The Nasdaq had risen over 2% on Wednesday as concerns over the pace and extent of Fed policy tightening eased a little.
Stocks likely to be in focus later, aside from the consumer companies mentioned above, include ArcelorMittal (NYSE:MT) and AstraZeneca (NASDAQ:AZN) and L’Oreal, which reported during the European morning, along with Linde (NYSE:LIN), Duke Energy (NYSE:DUK) and Datadog (NASDAQ:DDOG). Illumina, Expedia (NASDAQ:EXPE) and Verisign (NASDAQ:VRSN) report after the close.
4. China opens the credit spigot, again
Policy may be tightening in the developed world, but the liquidity floodgates are opening again in China after the central bank loosened monetary policy last month.
New loans hit a new all-time high in January, well ahead of forecasts, while M2 money supply growth accelerated to an annual rate of 9.8% from 9.0%, also faster than expected.
The news comes at a time when regulators are furiously trying to keep credit flowing to the real estate sector at a time when international bond markets are closed due to ongoing uncertainty over its hidden losses and over who bears ultimate liability for them.
5. Oil resumes upward march after EIA inventory data
Crude oil prices resumed their upward climb after a brief bout of profit-taking by financial players in the wake of Wednesday’s U.S. inventories data.
Prices had dipped after a renewed increase in U.S. oil demand was confirmed by a 4 million barrel drop in crude stockpiles last week, the biggest monthly drop in four months.
By 6:30 AM ET, U.S. crude futures were up 1.2% at $90.70 a barrel, while Brent crude futures were up 0.8% at $92.28 a barrel.
OPEC releases its monthly report on the state of the oil market at 7:45 AM ET, according to newswire reports.