FINWIRES · TerminalLIVE
FINWIRES

Stocks Rise Pre-Bell as Investors Assess Fed Rate Outlook

By
Stocks Rise Pre-Bell as Investors Assess Fed Rate Outlook

The benchmark US stock measures were trending higher before the open Friday as investors continued to assess the Federal Reserve's policy path ahead following its latest interest-rate hike.

The S&P 500 rose 0.2%, the Dow Jones Industrial Average edged up 0.1% and the Nasdaq added 0.4% in premarket activity. The three main indexes finished Thursday trading higher, snapping a three-day losing streak.

Earlier in the week, the Fed raised its benchmark lending rate by 25 basis points in a unanimous vote to combat sticky inflation, while signaling another hike could happen later this year.

Deutsche Bank expects the Fed to deliver another 50 basis points of tightening through quarter-point rate increases in December and March, strategist Matthew Luzzetti said in a note emailed toon Thursday. Macquarie Group also expects another 50 basis points of tightening, comprising quarter-point rate increases in December and the first quarter of 2027.

"After more than five years of significantly elevated inflation, a period which included a rate cutting cycle, the new Warsh Fed appears to be taking a step in the right direction to combat dangerously high price pressures," Stifel Chief Economist Lindsey Piegza said in a Thursday report. "The (Federal Open Market Committee) appears sincere in its commitment to restore price stability."

Markets are pricing in a 55% probability that the central bank will increase interest rates by 25 basis points in October, with the remaining odds in favor of a pause, according to the CME FedWatch tool.

Treasury yields were rising, with the two-year rate gaining 2.3 basis points to 4.71% and the 10-year rate increasing 1.2 basis points to 4.96%.

Fed Vice Chair for Supervision Michelle Bowman, a permanent voting member of the central bank's policy-setting committee, is scheduled to speak at 9:30 am ET, while Kansas City Fed President Jeff Schmid is slated to speak at 11:45 am.

Friday's economic calendar has the industrial production report for August at 9:15 am, while the weekly Baker Hughes oil-and-gas rig count is out at 1 pm.

West Texas Intermediate crude oil dipped 0.5% to $101.45 a barrel, while Brent declined 1.4% to $103.41.

The US State Department approved a potential $24.3 billion sale of 48 Lockheed Martin (LMT) F-35 fighter jets and related equipment to Saudi Arabia, CNBC reported.

The approval comes as Yemen's Houthi rebels ramp up their attacks on the Kingdom. The Iran-backed military group recently launched drone attacks on Saudi Arabia's East-West oil pipeline, resulting in its shutdown.

Berkshire Hathaway's (BRK.A, BRK.B) class A and B shares were down pre-bell after the multinational conglomerate announced that Warren Buffett will step down as chairman, effective immediately, with his son Howard Buffett to succeed him.

Alphabet's (GOOG, GOOGL) class A and C stock were up more than 2% each, while DraftKings (DKNG) rebounded 0.5% following a 7.6% drop at the close of Thursday. Steel Dynamics (STLD) decreased 1.8% as the steel producer issued a downbeat third-quarter earnings outlook.

Gold nudged 0.5% higher at $4,419 per troy ounce, while bitcoin advanced 2.2% to $78,199.

What else is happening in US Markets?

New Zealand Sees Sharp Rise in International Airfares in August
US Markets

New Zealand Sees Sharp Rise in International Airfares in August

New Zealand saw a sharp rise in international airfares in August, primarily by higher fares to Europe and Asia amid a rise in global oil prices caused by the Middle East conflict.International airfares rose 4.3% month-on-month in August and increased 21.5% on a yearly basis, being the largest annual increase in international airfares since April 2023, Stats NZ's selected price indexes data showed."Because we collect some international airfare prices around four months in advance, price changes that occurred earlier in the year for travel in August are now being reflected," said Nicola Growden, the prices and deflators spokesperson at Stats NZ.Food prices rose 0.3% in August compared with the previous month, driven by a 1.7% increase in meat, poultry and fish prices, while non-alcoholic beverage prices fell 1.4%.Diesel prices rose 8.6% in the month and 45.8% from a year ago, while petrol rose 2% in August and 17.9% from the same time last year.ANZ said in a note that the selected prices data confirms the downside risk to its September quarter consumer price index forecast of 0.8% quarter on quarter and 3.9% year on year.While the selected prices data is still in line with the bank's non-tradable CPI forecast of 1.1% quarterly growth, the downside to its forecast comes from the tradable side of the CPI basket, which it said is likely to be looked through by the Reserve Bank of New Zealand's monetary policy committee, ANZ added.

^NZ50
Upside Inflation Risks Materialize in Australia, Weighing on Central Bank's Upcoming Rate Decision
US Markets

Upside Inflation Risks Materialize in Australia, Weighing on Central Bank's Upcoming Rate Decision

Policymakers at Australia's central bank flagged upside risks to inflation in August, and data since then suggests that some of those risks have started to materialize despite a slowdown in the domestic economy's growth, Reserve Bank of Australia Governor Michele Bullock said.In an opening statement delivered Friday to a House of Representatives standing committee on economics, the central bank chief said global cost pressures have intensified as the Middle East conflict shows little-to-no signs of a resolution.Bullock reiterated an expectation for inflation to remain elevated for some time, noting that the artificial intelligence boom and extreme weather events are placing upward pressure on a broad range of prices from energy to agriculture.Many businesses are now passing on higher input costs as oil and related prices have surged again, and remaining capacity pressures risk exacerbating the degree of the pass-through. If inflation proves to be more persistent, it may require "a stronger policy response," the governor said.The central bank has raised borrowing costs by 75 basis points so far in the year, bringing its official cash rate to 4.35%. As the bank gears up for its next meeting later in September, a key focus will be on determining whether policy is now tight enough to return inflation to the target band, Bullock said.She added that inflation concerns are not unique to Australia, as many other central banks are reacting to the global inflation shock by increasing rates or expressing a willingness to do so if needed."I recognize that higher interest rates are difficult for Australians with mortgages who are also facing cost-of-living pressures," Bullock said. "But reducing inflation is essential."The US Federal Reserve this week increased its target range on the overnight funds rate to 3.75% to 4% from 3.5% to 3.75% in a unanimous decision, marking its first rate hike since 2023.BofA Securities expects the Reserve Bank to boost its cash rate by 25 basis points to 4.60% at the upcoming meeting in September, as underlying price growth is accelerating and inflation pressures are becoming increasingly broad-based. A watch tool that tracks the market-implied rate probability currently forecasts an 82% likelihood for a rate increase at the meeting.

ASX 200
Japan's Core Inflation Cools in August Ahead of BOJ's Closely Watched Rate Call
US Markets

Japan's Core Inflation Cools in August Ahead of BOJ's Closely Watched Rate Call

Japan's closely watched core inflation slowed in August, pointing to a slight easing in underlying price pressures even as headline inflation remained steady.The core consumer price index, which excludes fresh food, rose 1.7% year over year in August, down from 1.8% in July, according to data from the Statistics Bureau released Friday.The reading missed the consensus forecast of 1.8% growth tracked by Investing.com.On a seasonally adjusted basis, the core CPI increased 0.1% from the previous month.The headline CPI rose 1.9% year over year, unchanged from July, while the seasonally adjusted index was flat from the previous month.A measure excluding both fresh food and energy rose 1.9% year over year, matching July's pace, and increased 0.3% from the previous month.Food prices remained a key source of upward pressure. Prices excluding fresh food rose 3% year over year, while fresh food prices increased 7%. Fresh fish and seafood prices climbed 13.5%, while fresh vegetables rose 5.5%.Among other categories, housing-related costs increased 3.1% year over year, while furniture and household goods prices rose 1.2%. Transport and communications costs increased 3.7%.Energy prices, however, continued to weigh on headline inflation. Energy prices fell 0.7% year over year, with electricity prices down 2.4% and gasoline prices down 2.6%.Education costs provided another drag, falling 6.4% year over year, largely reflecting a 73.2% decline in private high-school tuition.The data comes ahead of the Bank of Japan's policy decision, with all BOJ watchers surveyed by Bloomberg expecting the central bank to raise its benchmark rate to 1.25% from 1% at the end of its two-day meeting.If delivered, it would mark the second rate increase in three months and the shortest interval between hikes since March 1990.

Nikkei 225