US stocks turn higher on optimism that inflation will cool further and allow the Fed to ease tightening.

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US stocks turn higher on optimism that inflation will cool further and allow the Fed to ease tightening

US stocks closed higher Tuesday as optimism grew that inflation will continue cooling and give the Federal Reserve more room to ease its tightening campaign.

Wall Street equity futures edged higher and European stocks climbed as traders assessed whether US consumer price data on Thursday will show further softening, bolstering the case for less-aggressive interest-rate hikes.

S&P 500 and Nasdaq contracts both gained about 0.3%. Bath & Beyond Inc. shares surged in US premarket trading, advancing alongside fellow meme stocks, with the troubled home-goods retailer on course for a third day of gains. Miners were among outperformers in the Stoxx Europe 600 Index, boosted by optimism China’s economic reopening will spur demand for metals. 

Airline stocks slipped in New York premarket trading as the failure of a key pilot notification system operated by the Federal Aviation Administration disrupted air travel. American Airlines Group Inc. fell 1.9% and United Airlines Holdings Inc., which said its flights were temporarily grounded, was down 0.5%.

Treasury yields trimmed their advance from the previous session, with the rate on 10-year debt slipping to just below 3.6% as investors remained focused on the price outlook for the US. A gauge of dollar strength held within sight of a seven-month low. 

Federal Reserve Chair Jerome Powell in remarks Tuesday refrained from commenting on the outlook for monetary policy as traders await the inflation numbers for any signs of cooling. That could support a move toward slower rate increases, even as some officials say it’s too early to declare victory over inflation.

In Asian trading, positive sentiment over China helped the MSCI Asia Pacific Index add to Monday’s move, when it entered a bull market amid hopes for economic growth and weakness in the dollar.

Optimism over demand from China was also evident in the iron ore market, with the steel-making ingredient rallying above $120 a ton in Singapore. Copper rose above $9,000 a ton for the first time since June, fueled by hopes of increased consumption by the world’s top user of the metal.

Elsewhere in markets, oil reversed an earlier decline as traders weighed the outlook for stronger Chinese demand against a reported build in US crude stockpiles.

Key events this week:

  • ECB Governing Council members speak at Euromoney conference in Vienna, Wednesday
  • US CPI, initial jobless claims, Thursday
  • St Louis Fed President James Bullard at Wisconsin Bankers Association virtual event, Thursday
  • Richmond Fed President Thomas Barkin speaks at VBA/VA Chamber, Thursday
  • China trade, Friday
  • US University of Michigan consumer sentiment, Friday
  • Citigroup, JPMorgan, Wells Fargo report earnings, Friday

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