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Small Caps Lift Stock Futures As Traders Await Inflation Data: Analyst Says ‘Now Is A Good Time’ To Diversify Portfolios

Positive expectations for June inflation data have boosted market sentiment, reflected in higher stock futures for Wednesday’s opening

Positive expectations for June inflation data have boosted market sentiment, reflected in higher stock futures for Wednesday’s opening. If inflation data aligns with expectations, it could fuel hopes of the Federal Reserve maintaining its current stance or even considering rate cuts. According to a JPMorgan economist, consumer price inflation is predicted to stabilize for the remainder of 2023 before gradually declining to 2.0% by the end of 2024.

Traders work on the floor of the New York Stock Exchange on April 26, 2023, in New York City. The stock market opened up slightly high as investors respond to earnings reports from tech companies’ after losses on Tuesday following rough economic data and earnings earlier in the day. (Michael M. Santiago/Getty Images) 

Traders will also closely watch for the release of the Federal Reserve’s Beige Book, speeches by central bank officials, and any pre-announcements from companies.

For the second consecutive session, major stock indexes ended higher on Tuesday, driven by expectations of a slowdown in inflationary pressures and the potential for a more dovish Fed approach.

The Dow Industrials and the Russell 2000 Index outperformed, remaining above the unchanged line throughout the session. The S&P 500 and Nasdaq Composite experienced some volatility but ultimately closed higher.

Energy stocks led the gains, contributing to a broad-based buying trend across various S&P sectors.

The resilience of the market has given confidence in the market trajectory going into the second half of the year. 

“The bottom line with equities is that caution is warranted given the impressive rally we have experienced in the first half of the year,” said Commonwealth Financial Network’s Head of Investment Management Brian Price.

The analyst sees geopolitical risks continuing. “We are not out of the woods when it comes to inflation,” he said.

“Now is a good time for investors to look at their portfolios to ensure that they are well-diversified and not overexposed to the areas of the market that may have been working too well (i.e., technology) as of late.”

The Bureau of Labor Statistics consumer price inflation report for June is due at 8:30 a.m. EDT. The month-over-month change of the headline consumer price index is expected at 0.3%, faster than the 0.1% increase in May. Core consumer prices may have increased at a slightly slower pace of 0.3% compared to the 0.4% growth in May.

The consensus forecasts for the annual rate of the consumer and core consumer prices are at 3.1% and 5%, respectively, in June. This compares to the 4% and 5.3% rates recorded for May.

The Energy Information Administration will release its weekly petroleum status report at 10:30 p.m. EDT.

The Federal Reserve is scheduled to release its Beige Book at 2 p.m. EDT on Wednesday. The report provides anecdotal evidence of economic conditions in the 12 Federal Reserve districts.

Minneapolis Fed President and FOMC member Neel Kashkari will make a public appearance at 9:45 a.m. EDT.

The Cleveland Fed’s June consumer price inflation report is scheduled to be released at 11 a.m. EDT.

Atlanta Fed President and FOMC member Raphael Bostic will speak at 1 p.m. EDT.

Cleveland Fed President and FOMC member Loretta Mester is due to speak at 4 p.m. EDT.

Produced in association with Benzinga

Edited by Alberto Arellano and Joseph Hammond

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