S&P 500 Forecast: Stocks edge higher ahead of US data drop, Arm IPO

US futures

Dow futures +0.25% at 34660

S&P futures +0.37% at 4482

Nasdaq futures +0.36% at 15400

In Europe

FTSE +0.61% at 7585

Dax -0.15% at 15636

• US PPI, retail sales & jobless claims due
• Arm is set to float at $51 per share
• USD holds steady, ECB rate decision in focus
• Oil rises on supply concerns

US PPI, retail sales and jobless claims due

US stocks are edging higher as investors look ahead to more inflation data, as well as jobless claims and retail sales figures, which could provide more clarity over the US monetary policy outlook.

Yesterday, US CPI data showed that consumer prices rose at the fastest pace in 14 months in August as the cost of petrol pushed inflation higher. However, at the same time, the annual increase in core inflation was the smallest in almost two years.

The Federal Reserve is expected to keep interest rate hikes on hold when they meet next week. However, there is uncertainty over whether the Fed will look to raise interest rates once more before the end of the year.

Investors will now look to PPI data for further clues on inflation. On a monthly basis, PPI is expected to rise 0.4%, up from 0.3% in July. On an annual basis, PPI is expected to rise 1.2% in August, up from 0.8%.

Meanwhile, US retail sales are expected to show a rise of 0.2% after rising 0.7% in July and jobless claims are expected to rise by 225K after falling to the lowest level since February in the previous week.

Upbeat data could feel bets of a November rate hike, or raise the likelihood of the Federal Reserve keeping rates high for longer, which could drag on stocks and lift the price of the US dollar.

Corporate news

Arm, The UK chip holder will be in the spotlight as it floats on the NASDAQ exchange at $51 a share at the top end of its indicated range and valuing the company at around $54 billion. The IPO price is set at the higher end of the range due to high demand, which resulted in the stock being more than five times oversubscribed.

S&P 500 forecast – technical analysis.

The S&P 500 continues to trade caught between 4430 on the downside, the September low, and the 50 sma at 4480 on the upside. Buyers appear to be winning with a rise above 4480 needed to extend gains to 4540 the September high. Sellers looking to break below 4430, exposing the 100 sma at 4365.

FX markets – USD flat, EUR steady

The USD continues to hold steady for a second day as investors digest yesterday's inflation data and look ahead to the US data drop shortly. Inflation pushed higher in August, but the fact the US dollar hasn't risen on the back of this news suggests that it was already priced in.

EUR/USD is holding steady ahead of the ECB interest rate decision, which is set to be a very finely balanced decision. While data points to a recession in the second half of the year, inflation is still high at 2.5 times the ECB's 2% target. A 25 basis point rate hike would take the lending rate to 4% a record high but could well be the last hike in the cycle as the economic outlook deteriorates.

GBP/USD is falling after soft data this week raises concerns over the health of the UK economy, which appears to be heading for a recession in the second half of the year. Weak data puts into question the BoE’s ability to hike interest rates much further. The UK central bank will meet next week and could hike rates for the last time in this hiking cycle.

EUR/USD +0.04% at 1.0733

GBP/USD -0.11% at 1.2469

Oil rises on supply deficit expectations

Oil Prices are rising to a fresh 10-month high has markets focus on tight supply, overshadowing worries about weaker economic growth and rising US inventories.

Saudi Arabia and Russia's extension of oil output cuts will result in an oil deficit across the final quarter of the year, according to reports from both OPEC and the IEA.

Concerns over tight supply overshadowed the EIA’s inventory data yesterday, which showed a surprise rise in US stockpiles. Worries over economic growth could limit the upside after US inflation rose, keeping another interest rate hike on the table before the end of the year.

WTI crude trades +1.2% at $89.17

Brent trades +1.2% at $92.63

Looking ahead

13:30 US retail sales

13:30 US jobless claims

13:30 US PPI