Article published at 9:15 a.m. CT
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Markets take another tumble
- Oil prices print over $100
- PPI sees inflation edging higher, in line with expectations
The markets took another pointed turn to the downside in early trading as oil prices took off again and wholesale prices rose, continuing to ignite fears of a hike in interest rates.
WTI Crude Oil prices printed above $100 per barrel, reaching levels hit in March for the same reason: escalation of the war between the U.S. and Iran that is blocking oil shipments through the Strait of Hormuz. Inflation fears were further stoked when the European Central Bank (ECB) upped its interest rates by 25 basis points on Thursday. Brent crude, a global benchmark, is seeing prices climb over $105 per barrel.
The Producer Price Index (PPI) grew by 0.4%, matching Wall Street’s inflation expectations, and signaling that the prices consumers pay on retail goods may continue to rise.
That helped push the three major indices lower, with the Nasdaq Composite giving up better than 0.72% while the S&P 500 Index is falling 0.54% and the Dow Jones Industrial Average by 0.33%.
Another inflation gauge comes out tomorrow morning with the Consumer Price Index (CPI), which tracks the average price of a basket of goods and services and is considered a crucial measure when the Federal Reserve weighs interest-rate considerations. The CME FedWatch tool is hovering at a 70% probability of a rate hike when the Federal Open Market Committee meets next week. Yesterday, that prospect stood at 61.2%.
Watch for Oracle’s earnings report after the bell, which could have some impact on the Nasdaq. Investors are seeing about a 12% implied move in either direction, buying 175 calls. That is in line with what we have seen over the last eight quarters. Adobe’s earnings are coming out when the market closes as well, offering more insight into the tech sector. Adobe’s implied volatility is at 5.1%.
Investors are buying into a Novartis rebound after this week’s sharp selloff triggered by a rough week of trial failures, pushing shares up 1.21%. Meanwhile, a major shareholder is calling for board changes because of “uninspiring at best” mergers and acquisitions, according to Reuters, which could further pressure shares.
Bloomingdale’s was the shining star again among Macy’s three retail brands when the luxury department store turned in its second-highest results in its 165-year history, according to the company. But it was tariff refunds that did more to fuel a 94% year-over-year leap in bottom-line profits, and 100% vault in earnings per share. That led the parent of its flagship Macy’s department store and Bluemercury luxury beauty products to also lift its full-year guidance, but with caution because of ongoing macroeconomic and geopolitical challenges. Investors were cautious too, pushing shares lower by 3.5% in early trading.
American Eagle Outfitters shares are tumbling nearly 13% after the parent of the namesake retailer and Aerie, the women’s lingerie brand, turned in better-than-expected earnings results, but said margins going forward are likely to fall flat.
Happy Trading!
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