CPI on the Horizon, Fed Minutes, Delta Air Lines Reporting – What’s Influencing the Markets

Futures on Wall Street are experiencing a slight decline as investors await the latest US inflation report and a series of corporate earnings announcements. Economists anticipate that the annual increase in headline prices will have moderated closer to the Federal Reserve’s 2% target in September. Additionally, minutes from the Fed’s recent meeting indicate that a significant majority of members favored a 50-basis point interest rate cut, though some voiced concerns about the magnitude of such reductions.

1. Futures Lower

US stock futures have mostly dipped, reflecting a cautious approach from investors ahead of upcoming economic data and earnings results.

As of 03:30 ET, the Dow futures were down by 26 points (0.1%), while the S&P 500 and Nasdaq 100 futures each fell by 7 points (0.1%) and 27 points (0.1%), respectively.

In the previous session, major Wall Street indices closed higher, influenced partly by the release of the Fed’s September meeting minutes.

Alphabet shares regained some ground after suffering losses linked to the US Department of Justice’s court filing, which suggested a potential breakup of parts of Google’s search business.

2. CPI Ahead

Markets are gearing up for fresh inflation data that could influence the Fed’s upcoming policy decisions.

Economists predict that the consumer price index (CPI), a critical measure of inflation, will show a slowdown to 2.3% year-over-year for September, down from 2.5% in August. Month-on-month, the estimate is a decrease to 0.1% from last month’s 0.2%.

"Core" CPI, which excludes volatile items such as food and energy, is expected to hold steady at 3.2% year-over-year but ease slightly to 0.2% month-over-month.

Additionally, first-time unemployment claims are anticipated to rise to 231,000 from 225,000. However, the effects of Hurricane Helene and ongoing strikes at Boeing could influence these numbers.

The positive jobs report from the previous week has fueled optimism that the Fed can successfully manage inflation without damaging the labor market or overall economic activity.

3. Fed Minutes Reveal Consensus on Rate Cut

According to the minutes from the recent Fed meeting, a "substantial majority" of officials supported a 50-basis point cut in interest rates.

However, opinions were divided on the cut’s severity, with one member dissenting in favor of a more conventional quarter-point reduction.

The minutes also revealed that some policymakers thought a smaller cut might have been appropriate, citing job market strength and ongoing inflation concerns.

Despite this, there was consensus that the significant cut did not indicate a predetermined course for future rate reductions.

Traders are currently estimating an 85% probability of a 25-basis point rate cut in the upcoming November meeting, while a 15% chance exists for rates to remain unchanged in the current range of 4.75% to 5.00%.

4. Delta Air Lines Earnings Report

The earnings season for US airlines is about to begin, starting with Delta Air Lines reporting on Thursday.

In its latest quarter, Delta posted record revenue of $15.4 billion, slightly below Wall Street’s expectations, primarily due to summer travel demand leading to fare pressure from overcapacity.

CEO Ed Bastian reassured investors that the company expects stronger pricing power from August onward.

Analysts at Bank of America Securities are focused on Delta’s capacity growth when viewing its upcoming report. They see a favorable industry environment with stable travel demand and moderating capacity growth, suggesting that airlines will likely benefit from recent declines in fuel prices in the fourth quarter.

5. Oil Prices Rise Amid Hurricane Milton

Oil prices increased as Hurricane Milton made landfall in Florida, raising concerns about potential supply disruptions in the Middle East.

By 03:31 ET, Brent crude rose 0.7% to $77.09 per barrel, while US crude (WTI) traded up 0.7% at $73.77 per barrel.

Despite recent declines of around 5% over the last two sessions, the demand for gasoline in Florida due to the hurricane has supported crude prices.

Traders are also wary of escalating tensions in the Middle East, particularly regarding Israel’s potential targeting of Iran’s oil facilities.