- US stock index futures are trading slightly higher after Monday's turmoil.
- The data on durable goods orders for January will stand out on the US economic agenda.
- Stock markets could react to US CPI inflation figures due out later in the week.
S&P 500 futures are up 0.06%, Dow Jones futures are unchanged and Nasdaq futures are up 0.15% ahead of Tuesday's open.
The S&P 500 (SPX), Dow Jones (DJIA) and Nasdaq (IXIC) indices closed on Monday with a loss of 0.38%, a decline of 0.16% and a decline of 0.13%, respectively.
What you need to know before the stock markets open
The Energy sector rose 0.32% on Monday, being the main S&P sector that performed best on the day. On the other hand, the Public Services Sector fell 2.1%.
Shares of Palo Alto Networks Inc. (PANW) and Domino's Pizza Inc. (DPZ) rose the most on the S&P 500 on Monday, up 7.33% and 5.84%, respectively. Insulet Corp. (PODD) lost nearly 8.4% on the day as the biggest decliner, closely followed by Alphabet's Class C and Class A shares, which lost 4.5% and 4.4% each.
Jim Reid, global head of economic and thematic analysis at Deutsche Bank, said that “as we begin a new week, equities struggled to maintain their spectacular recent momentum, with the SP500 down 0.38% on Monday”:
“The Nasdaq gave up a marginal -0.13%, while the Big 7 lost -0.39%, dragged down by Alphabet's -4.44% decline, amid concern over recent errors in its artificial intelligence model. The stocks Small caps were the most profitable, with the Russell 2000 up +0.61%. In Europe, the picture was more negative, with the STOXX 600 down -0.37% from its all-time high on Friday. Still, it wasn't all bad news , as the DAX (+0.02%) hit a new record and euro high-yield bond spreads hit their tightest level in more than two years.”
Inflation FAQ
What is Inflation?
Inflation measures the rise in prices of a representative basket of goods and services. General inflation is usually expressed as a month-on-month and year-on-year percentage change. Core inflation excludes more volatile items, such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the target level of central banks, which are mandated to keep inflation at a manageable level, typically around 2%.
What is the Consumer Price Index (CPI)?
The Consumer Price Index (CPI) measures the variation in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage of inter-monthly and inter-annual variation. Core CPI is the target of central banks as it excludes food and fuel volatility. When the underlying CPI exceeds 2%, interest rates usually rise, and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually translates into a stronger currency. The opposite occurs when inflation falls.
What is the impact of inflation on currency exchange?
Although it may seem counterintuitive, high inflation in a country drives up the value of its currency and vice versa in the case of lower inflation. This is because the central bank will typically raise interest rates to combat higher inflation, attracting more global capital inflows from investors looking for a lucrative place to park their money.
How does inflation influence the price of Gold?
Gold was once the go-to asset for investors during times of high inflation because it preserved its value, and while investors often continue to purchase gold for its safe haven properties during times of extreme market turmoil, this is not the case. most of the time. This is because when inflation is high, central banks raise interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity cost of holding Gold versus an interest-bearing asset or placing money in a cash deposit account. On the contrary, lower inflation tends to be positive for Gold, as it reduces interest rates, making the shiny metal a more viable investment alternative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
