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U.S. inflation looms, debt ceiling talks, Disney reports - what's moving markets

Published 10/05/2023, 07:34 pm
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Investing.com -- Investors are counting down to all-important U.S. inflation data. Meanwhile, the clock is ticking in Washington, where lawmakers are holding high-stakes debt ceiling negotiations as a default deadline inches closer.

1. U.S. inflation data due

Sticky, elevated, stubborn. However you'd like to call it, higher-than-normal price growth in the U.S. looks set to remain in place for the time being.

Economists predict that the consumer price index, due out today, will show that headline inflation in the world's largest economy held steady at 5% on an annualized basis in April. The core reading, which strips out volatile items like food and energy, is seen slowing slightly to 5.5% year-on-year - a level still well above the Federal Reserve's 2% target.

The data will likely have an impact on expectations for the Fed's future interest rate decisions. The U.S. central bank has hinted that it may push pause on a year-long tightening campaign at its next meeting in June, although Fed Chair Jerome Powell noted that it is "prepared to do more" if further policy restraint is necessary.

2. Futures choppy ahead of CPI release

U.S. stock futures pointed lower in choppy trading on Wednesday as investors await the unveiling of the monthly inflation data at 8:30 ET.

At 05:00 ET (09:00 GMT), the Dow futures contract was down by 38 points or 0.11%, S&P 500 futures traded 14 points or 0.14% lower, and Nasdaq 100 futures shed 31 points or 0.24%.

All three of the indexes dipped in the prior session, with Wall Street's attention split between the CPI numbers and the ongoing political wrangling in Washington over the U.S. debt ceiling (see below).

3. Debt ceiling talks

Along with inflation, one of the most pressing issues facing the U.S. economy is the bitter fight playing out in Washington over raising the country's $31.4 trillion debt ceiling.

U.S. President Joe Biden held talks with House Speaker Kevin McCarthy and other lawmakers at the White House late on Tuesday, but were unable to forge an agreement. Both Biden and McCarthy, who are at odds over federal spending plans, came out of the meeting promising that their respective aides would stay in touch every day.

The stakes could scarcely be higher. Lawmakers face a looming deadline to reach a deal to lift the debt limit or risk a potentially catastrophic default. Estimates vary on when exactly this so-called "X-date" lands, although it is widely expected to fall early next month.

4. Disney headlines earnings batch

"Guardians of the Galaxy: Vol. 3" may have raked in $118.4 million in domestic ticket sales for Disney (NYSE:DIS) in its opening weekend, but the focus for many observers of the entertainment giant is on its performance away from the big screen.

Analysts will be keen to get a sense of how Disney's traditional television offerings are faring as a broader economic slowdown threatens to weigh on advertising. Competitors like Warner Bros. Discovery Inc. (NASDAQ:WBD) and Paramount Global (NASDAQ:PARA) already reported big drops in traditional TV ad revenues last week.

Disney's streaming business will also be under scrutiny. Investors will be particularly eager to see progress in Chief Executive Robert Iger's sweeping restructuring of the company and how it is helping to make the service profitable.

Other corporate names set to issue their latest earnings today include insurance group Manulife Financial Corp (NYSE:MFC) and fertilizer firm Nutrien (NYSE:NTR).

5. Oil prices drop

Oil prices slipped on Wednesday, as traders braced for the U.S. inflation data and eyed a surprise jump in oil inventory levels.

At 05:03 ET, U.S. crude futures were 1.52% lower at $72.59 a barrel, while the Brent contract fell by 1.47% to $76.30.

A weekly estimate from the American Petroleum Institute, cited by Reuters, showed that U.S. crude inventories unexpectedly jumped by 3.618 million barrels in the week ended on May 5, rebounding from a decline of 3.939 in the prior week. The figure, which was previously forecast to dip during the period, has created fresh worries over demand in the U.S. - the world's largest oil consumer.

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