Wall Street Jittery Ahead Of Key Inflation Data After Delta Air Lines, Pepsi Disappoint: Strategist Recommends Sector Picks Amid Evolving Election Dynamics

The futures market on Thursday reflected jitteriness as traders awaited the all-important consumer price inflation data. The broader market is amid a multi-session winning run and has been breaking records session after session, sending the valuation of especially some mega-cap stocks to unsustainable levels. An in-line to tamer monthly headline number could push up the S&P 500 Index by as much as 1.75%, according to JPMorgan’s trading desk. A miss could send the index tumbling by as much as 2.50%, traders at the firm said.

The first few key earnings reports that dropped in disappointed, likely setting off worries concerning the reporting season. Traders may also keep a close eye on a couple of speeches by Federal Reserve officials and the Treasury auctions scheduled for the day.

Futures	Performance (+/-)
Nasdaq 100	-0.08%
S&P 500	-0.10%
Dow	-0.13%
R2K	-0.07%

Cues From Last Session:

U.S. stocks advanced strongly on Wednesday due to the support lent by Fed Chair Jerome Powell’s dovish comments that further accelerated the tech rally. The major indices gap-opened higher and moved roughly sideways in the first hour of trading. As traders digested Powell’s comments, they launched into a steady rally until the final hour of trading and the slope of the rally steepened thereafter, lifting the averages to a strong close.

The S&P 500 Index and the tech-heavy Nasdaq Composite continued their record-breaking streak, both on an intraday and closing basis, with the former setting its sixth straight record close and the latter the seventh. The Dow Jones Industrials Average, which has lagged its other two illustrious counterparts, had the best session since May 31, with all but two index components closing in the green.

Index	Performance (+/-)	Value
Nasdaq Composite	+1.18%	18,647.45
S&P 500 Index	+1.02%	5,633.91
Dow Industrials	+1.09%	39,721.36
Russell 2000	+1.10%	2,051.75

Lisa Shalett, Chief Investment Officer at Morgan Stanley, in a recent podcast, offered her take on the implications of the Nov. 5 election for investors now that it appears that the presumptive Republican candidate Donald Trump appeared to be pulling away with an appreciable lead.

She sees a potential extension of the 2017 tax cuts in the eventuality of a GOP victory to contribute to higher interest rates, which in turn may weigh on corporate profits and stock valuations. Higher tariffs could reignite inflationary pressure, potentially exacerbating consumer pain from high prices, she said. The strategist also sees immigration curbs to slow U.S. population gains that have supported economic growth and disinflation.

“Investors should consider adding portfolio exposure to business sectors such as energy, telecommunications and utilities, while focusing on investments that offer growth at a reasonable price,” she said.

Lumida Wealth’s Ram Ahluwalia suggested that Wednesday’s stock market rally is a foretaste of things to come when the Fed cuts rate. “What you saw yesterday, and on last month's CPI print, is a preview of what will happen when the Fed cuts Small caps especially will ramp, and we can see it happening now,” he said.

Upcoming Economic Data:

The Bureau of Labor Statistics is due to release its consumer price inflation report for June at 8:30 a.m. EDT. The consensus estimates are as follows:

	Consensus	April Readings
CPI (m-o-m)	0.1%	0%
CPI (y-o-y)	3.1%	3.3%
Core CPI (m-o-m)	0.2%	0.2%
Core CPI (y-o-y)	3.4%	3.4%

Among the other Main Street events are:

• The Labor Department’s weekly jobless claims report, due at 8:30 a.m. EDT, is expected to show that the number of individuals claiming unemployment benefits may have edged down to 236,000 in the week ended July 6 versus 238,000 in the previous reporting week.
• Atlanta Fed President Raphael Bostic is scheduled to speak at 11:15 a.m. EDT.
• St. Louis Fed President Alberto Musalem will make a public appearance at 1 p.m. EDT.
• The Treasury will auction four- and eight-week notes at 11:30 a.m. EDT and 30-year notes at 1 p.m. EDT.
• The Treasury will release the monthly federal budget for June at 2 p.m. EDT. Economists, on average, expect the deficit to shrink from $228 billion to $33 billion.

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Stocks In Focus:

• PriceSmart, Inc. (NASDAQ:PSMT) rose nearly 6% in premarket trading in reaction to its quarterly results, while WD-40 Company (NASDAQ:WDFC) climbed nearly 12.50%.
• Delta Air Lines, Inc. (NYSE:DAL) and PepsiCo. (NYSE:PEP) reported quarterly results ahead of the market open, with the former falling over 6% after an earnings miss and weak third-quarter forecast, while the latter fell over 1.50% as second-quarter sales came in just shy of estimates of some analysts.
• Tesla, Inc. (NASDAQ:TSLA) fell 0.61% following its 11-session winning streak, while its mega-cap peer Nvidia Corp. (NASDAQ:NVDA) continued to grind higher.

Commodities, Bonds And Global Equity Markets:

Crude oil futures climbed for a second straight session and traded around the $82.50-a-barrel level and gold futures also traded in the green as they approached the $2,400 mark.

The 10-year Treasury note yield, which edged down on Wednesday, was modestly lower at 4.273%.

Bitcoin (CRYPTO: BTC) edged down but has climbed past the $58K level after settling Wednesday’s session at around $57.7K.

Among equity markets, Asia followed Wall Street’s lead and closed notably higher, with the Hong Kong and Chinese markets recording standout gains. Japan’s Nikkei 224 average ended at a record high. Some positive regional data also added to the buoyancy. The Indian market bucked the trend and settled marginally lower.

In Europe, stocks started on a firm note after German inflation data came in line with expectations and the U.K. GDP rose strongly in the second quarter.

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