U.S. stock futures traded higher on Wednesday after another encouraging inflation report strengthened hopes that the Federal Reserve may not need to raise interest rates in the near term. Investors, however, remained cautious as rising oil prices and escalating tensions in the Middle East continued to cloud the broader outlook.
Producer prices fall more than expected
Markets reacted positively after the U.S. Labor Department reported that producer prices declined by 0.3 percent in June, exceeding expectations for a 0.1 percent decrease.
The annual producer inflation rate also slowed to 5.5 percent from a revised 6.0 percent in May, adding to evidence that inflationary pressures may be easing.
The figures followed Tuesday’s weaker-than-expected consumer inflation report, reinforcing expectations that the Federal Reserve could adopt a more patient approach to monetary policy.
Rising oil prices limit optimism
Despite the softer inflation data, gains across equity futures remained measured as crude oil prices continued to climb.
During an interview with Fox News, President Donald Trump warned that further military action against Iran remained possible.
“unless they get to the table and negotiate.”
Higher energy prices have raised concerns that inflation could prove more persistent, potentially delaying any future reduction in interest rates.
Technology stocks lead Wall Street higher
U.S. markets closed higher on Tuesday, led by gains in technology shares.
The Nasdaq Composite climbed 0.9 percent, while the S&P 500 added 0.4 percent. The Dow Jones Industrial Average finished only slightly higher after being weighed down by a sharp decline in IBM (NYSE:IBM).
IBM falls while chip stocks rebound
IBM shares plunged more than 25 percent after the company released preliminary quarterly results that disappointed investors.
Meanwhile, semiconductor stocks recovered strongly, with the Philadelphia Semiconductor Index rising 2.5 percent and the NYSE Arca Computer Hardware Index gaining 2.7 percent.
Steel, networking and gold-related shares also posted solid gains, while healthcare, pharmaceutical and airline stocks underperformed.
Investors are continuing to monitor incoming economic data and geopolitical developments for further direction.
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