FX.co ★ 10.08.2022: Wall Street cheers long-awaited inflation slowdown (S&P500, USD, CAD, Bitcoin)

Hi, dear traders! Here is a fresh review of US markets from our analysts. As expected, Wall Street was overwhelmed by the doom and gloom on Tuesday. The major stock indices traded sluggishly ahead of the crucial report on US inflation.

The Dow Jones shed 0.18% yesterday. The Nasdaq sank 1.19%. The S&P 500 lost 0.42% to trade at 4,122. Wall Street indices traded slightly higher in the New York pre-market. The intraday outlook for the stock indices is bullish. The S&P 500 is expected to trade in the corridor between 4,150 and 4,280.

The S&P 500 closed on Tuesday with losses for the fourth day in a row. Stocks of microchips manufacturers again came under the spotlight. Micron warned that its quarterly revenue forecasts might not match Wall Street’s consensus due to snags in supply chains. On Monday, Nvidia said that the weakness in the game sector could dent revenue in the second quarter. Besides, Novavax shares dropped after the company slashed twice its quarterly revenue forecast because of low demand for its COVID vaccine.

Today investors were anticipating the US CPI report for July. The red-hot data confirmed the long-awaited decline.

The annual rate of the US consumer inflation eased more than expected to 8.5% in July from 9.1% in June which is the fastest pace in the last 41 years. The consensus had suggested a higher CPI at 8.7%. Energy prices rose by 2.9% last month from the 42-year high at 41.6% in June.

The CPI stayed flat in July on month following a 1.3% increase a month ago. It is also lower than the expected 0.2% rise. The core CPI also logged zero growth and stayed at 5.9%, whereas analysts had projected a faster climb to 6.1%. Such data gives the market hopes that inflation has eventually topped out in the US.

As for corporate reports, Walt Disney is likely to publish a strong report on its corporate earnings.

Elon Musk sold 7.92 million Tesla shares worth 6.9 billion dollars according to the documents filed to the Securities and Exchange Commission. The sale was the condition for the Twitter purchase deal.

Coinbase stock slumped 6.1% after the company reported bigger-than-expected quarterly losses.

The stocks of companies with mega capitalization such as Apple, Tesla, Microsoft, Amazon, and Meta traded higher following the red-hot CPI report. The market could develop a rapid rally today. The inflation data dealt a blow to the US dollar. Its index tumbled by 1%, heading to 105 points. The intraday corridor for the index is seen between 104.3 and 105.5. The slowdown in consumer inflation immediately revived investors’ faith in softer monetary tightening by the US Fed. On the other hand, this is just the first sign of easing inflation, but it does not prove that the Fed’s battle against soaring inflation is over. Still, inflationary pressure remains high. Earlier, Fed officials mentioned that the CPI should decline steadily for a few months straight before the central bank gives up the idea of aggressive rate hikes. In this context, the market reckons that the Federal Reserve will raise the official funds rate by 50 basis points at the next policy meeting. The geopolitical jitters that feed the US dollar have not faded away. Thus, the US dollar index will hardly move away from its multi-year highs.

The USD/CAD pair is trading in the loonie’s favor amid the greenback’s softness. The currency pair has gained 0.5%. The intraday corridor for the pair is defined between 1.2760 and 1.2850.

The catalyst for the loonie’s strength is the fresh inflation data from the US. Benchmark oil grades are losing ground again.

Oil prices dropped in light of the news that Russian Transneft would resume the oil flow via the Druzhba pipeline later today. In response, futures on Brent crude fell 0.97% to trade at 95.05 dollars a barrel. WTI dipped 0.55% to trade at 89.99 dollars a barrel.