Dow surges over 500 points as oil falls; Investors digest US inflation data

US stocks opened sharply higher on Friday, September 11, with the major averages on track to snap a four-session losing streak as a retreat in oil prices eased some inflation concerns. Investors were also weighing the latest consumer inflation data and its implications for the Federal Reserve’s policy path ahead of next week’s meeting.

The Dow Jones Industrial Average jumped 515 points, or 1%, while the S&P 500 and Nasdaq Composite each gained about 1%.

The gains came despite August consumer prices showing some persistence in inflation. The Consumer Price Index rose 0.4% month-on-month and 3.4% year-on-year, in line with economists’ expectations but slightly above July’s reading. Core CPI, which excludes food and energy, increased 0.3% from the previous month, slightly more than expected.

Investors have been increasingly focused on the prospect of a Federal Reserve rate hike next week following the inflation reading. The latest data was the final major inflation report before policymakers meet.

Oil prices, meanwhile, pulled back after a sharp rally earlier in the week. West Texas Intermediate crude fell 3% to $99.28 a barrel, while Brent crude slipped 3.1% to $104.32. Both benchmarks were still on track for weekly gains of about 8%, despite Friday’s decline.

In the Treasury market, yields were little changed at the open. The two-year Treasury yield and other short-term rates edged higher, while longer-dated yields eased slightly. Treasury yields across the curve have risen by roughly 20 basis points over the past week.

Also Read: Fed September meeting: 6 data points that could shape Kevin Warsh’s rate call

Dow futures jump over 250 points as oil slides; Why today’s CPI data matters

US stock futures moved higher early Friday, September 11, as crude oil prices pulled back from sharp gains this week, while investors turned their attention to a key inflation reading that could influence the Federal Reserve’s interest-rate decision next week.

Dow Jones Industrial Average futures gained around 0.6%, or more than 250 points, while S&P 500 futures and Nasdaq-100 futures also rose about 0.6%.

The gains came after the major US indexes extended their losing streak to four sessions on Thursday. All three benchmarks were also on track to end the week lower.

Oil prices retreat

Oil prices eased in early trading, offering some relief to equity markets after crude surged this week amid escalating tensions in West Asia.

West Texas Intermediate futures fell 3.3% to $99.08 a barrel, while Brent crude futures declined 3.6% to $103.76.

Despite Friday’s pullback, both benchmarks remained on track for weekly gains of around 8%.

The recent oil rally has raised concerns about renewed inflationary pressure and its potential impact on the Federal Reserve’s rate path.

The Dow was heading for a weekly decline of around 2.5%, while the S&P 500 and Nasdaq were each set for losses of about 1.6%.

Also Read: Brent Crude prices cross $108 a barrel - Here's what is contributing to the surge

CPI data takes centre stage

Investors are now awaiting the August Consumer Price Index (CPI) report, due later today. The data is the final major inflation reading before the Federal Reserve’s September 16 policy meeting.

Economists surveyed by Dow Jones expect consumer prices to have increased 0.4% month-on-month in August, with annual inflation at 3.4%, unchanged from July.

Fed funds futures were pricing in roughly a 71% probability of a rate hike next week, according to CME Group’s FedWatch tool.

The CPI report could therefore prove crucial in determining whether the Federal Reserve holds rates steady or raises them at its upcoming meeting.

Christopher Hodge, chief US economist at Natixis CIB Americas, said the inflation reading will be key to the Fed’s decision, CNBC reported.

“A reading in line with consensus would represent the fourth consecutive month of encouraging inflation readings and ease pressure for a hike by the Fed in September,” Hodge said. “If inflation comes in hotter than consensus, we expect a hike at next week’s meeting.”

Also Read: What a Fed rate hike actually means for the US economy and inflation

Oracle shares jump

In individual stocks, Oracle shares jumped more than 7% in premarket trading after the software giant reported better-than-expected fiscal first-quarter results and strong growth in its cloud business.

The gains in Oracle offered some support to the broader technology sector ahead of the market open.