US markets on hold ahead of crucial inflation data

US markets are in a holding pattern as investors brace for this week’s key inflation releases, Reuters reported on Tuesday.

The April Consumer Price Index (CPI) takes centre stage on Wednesday, with Tuesday’s Producer Price Index (PPI) acting as an appetizer. Core PPI readings are expected to hold steady at 2.4 per cent for April.

Despite the lack of significant movement in producer prices, public perception of inflation paints a different picture.

The New York Fed’s April survey showed Americans anticipating inflation of 3.3 per cent a year from now, up from three per cent in the first quarter. This, coupled with a gloomier jobs outlook, raises concerns for the Federal Reserve.

While Fed Vice-Chair Phillip Jefferson offered limited insights, he acknowledged a slowdown in inflation reduction during the first quarter, raising concerns.

However, with crucial data looming, US Treasury yields dipped, and the S&P 500 remained rangebound. Stock futures hint at a similar Tuesday session.

Despite the data wait-and-see approach, optimism for rate cuts later this year lingers. Bank of America’s survey revealed 82 per cent of global fund managers anticipate the first Fed cut in the second half.

However, the dollar firmed against major currencies on Tuesday, including the Japanese yen.

Speculation swirls about a potential Bank of Japan (BOJ) shift away from its yield-curve capping bond-buying program. This has driven 10-year Japanese government bond yields to six-month highs near one per cent. Some market participants believe excessive yen weakness may force the BOJ’s hand on allowing interest rates to rise.

Back in the US, the “meme stock” craze seems to be making a comeback. GameStop surged nearly 75 per cent on Monday after a social media influencer associated with the 2021 meme stock rally reappeared online.

The rally spread to other meme stocks like AMC Entertainment.

ChatGPT-maker OpenAI announced GPT-4o, a new AI model capable of realistic voice conversations and interaction across text and image formats. Apple supplier Foxconn reported a 72 per cent rise in Q1 profit fueled by strong server demand, though it missed analyst forecasts.

Home Depot reports earnings later on Tuesday, while Walmart is reportedly cutting hundreds of corporate jobs and requiring most remote workers to return to offices.

In the M&A space, BHP is expected to sweeten its takeover offer for Anglo American after the latter rejected the initial bid. Anglo American, meanwhile, is exploring a potential break-up to counter the BHP offer.