Positive inflation report offers relief to battered US stocks

It’s been a turbulent week for the US economy. Fresh inflation data showed price pressures easing slightly, but fears of escalating trade tensions and a potential recession have rattled Wall Street.

How inflation fared last month: Price pressures eased slightly last month with headline inflation coming in at 2.8%, below economists’ forecasts of 2.9-3%, the Financial Times reports. The consumer price index from the US’ Bureau of Labor Statistics showed core inflation increased 0.2%, less than the 0.3% expected and down from January’s 0.3%, but still sits above the Fed’s targeted 2%. Futures markets are now expecting between two and three interest rate cuts this year from the Fed, according to the salmon colored paper.

Despite cooling inflation, recession risks persist. JP Morgan’s chief economist Bruce Kasman told Reuters there is a 40% chance of a US recession this year, citing economic uncertainty and the potential impact of US President Donald Trump’s import tariffs.

The positive inflation report gave US stocks some respite after the battering they took earlier this week, with most indexes gaining some ground. The S&P 500 ended Wednesday up 0.5% after swinging between a stronger early rally and a midday pullback. Meanwhile, the tech-heavy Nasdaq gained 1.2%.

ICYMI- The S&P 500 briefly entered correction territory on Tuesday, down more than 10% from its recent peak, as investor confidence eroded. It also wiped out USD 4 tn on Monday. The sharp sell-off has been driven largely by a 14% plunge in the “Magnificent 7” tech stocks, according to Goldman Sachs, with their price-to-earnings ratio falling from 30x to 26x.

Still, Wall Street is growing increasingly pessimistic about economic stability, with Goldman Sachs cutting its S&P 500 year-end target to 6.2k from 6.5k, citing slower growth and heightened policy risks, Reuters reports. “There’s a huge reset going on right now and a lot of trepidation in the market,” Dec Mullarkey, managing director at fund manager SLC Management, told the FT.

Hopes for a so-called “Trump put” — the belief that the president would intervene to stabilize markets — are fading. Unlike his first term, when stock sell-offs often led to policy reversals, investors now fear Trump may tolerate market turbulence to push through his economic agenda.

MARKETS THIS MORNING-

Asian markets are mixed, with Japan’s Nikkei and Topix, as well as South Korea’s Kospi, all up in early trade, while China’s CSI 3000 and Hong Kong’s Hang Seng down marginally. Over on Wall Street, futures indicate a strong open to continue yesterday’s rally.

THE CLOSING BELL-

The ADX rose 0.4% yesterday on turnover of AED 1.4 bn. The index is down -0.03% YTD.

In the green: Umm Al Qawain General Investment (+14.4%), United Arab Bank (+10.1%) and Phoenix Group (+8.5%).

In the red: Ooredoo (-9.4%), Fujairah Cement Industries (-6.8%) and Alpha Data (-5.0%).

Over on the DFM, the index rose 0.7% on turnover of AED 665.5 mn. Nasdaq Dubai was up 0.5%, and up 1.4% YTD.

CORPORATE ACTIONS-

Adnoc Gas has appointed Al Ramz Capital as the liquidity provider for its shares on the ADX for one year, according to an ADX disclosure (pdf). Al Ramz will provide liquidity for Adnoc’s shares, offering simultaneous buy and sell side orders.

Emirates Driving approved a dividend of AED 183.2 mn for 2024, representing 34% of the year’s paid capital, according to an ADX disclosure (pdf).