Dow, S&P 500 seen opening flat as geopolitical concerns dampen recent cheer

6.30am: Caution

US stocks are expected to open flat on Wednesday as the cheer over easing inflationary pressures is seen as likely to be offset by rising geopolitical worries arising from Russian missiles landing within the borders of NATO-member Poland. 

Futures for the Dow Jones Industrial Average were flat in pre-market trading, while those for the S&P 500 were little changed, and contracts for the Nasdaq-100 rose 0.1%. 

“US stocks extended rally yesterday, as the unexpected easing in producer prices beefed up the optimism that the Federal Reserve would soften the monetary tightening and the better-than-expected New York Empire State Manufacturing index hinted that the US economy is holding up well,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank. 

Investors reacted positively to the latest producer price index report, a measure of wholesale inflation, which rose 0.2% in October, lower than the 0.4% rise expected. The softer data came on the heels of last week’s easing in the consumer price index for October. 

Some of the cheer from the economic data is expected to continue into trading on Wednesday.

“News that Russian missiles fell to Poland somehow killed a part of that falling-inflation, resilient growth optimism. But escalation of tensions have been avoided so far,” said Ozkardeskaya.

Notably, however, the escalation in hostilities led energy prices higher. “US crude gained on the geopolitical concerns after the Poland attack, and on a more-than-5-million-barrel decline in US oil inventories last week,” said Ozkardeskaya.

Taiwan Semiconductor Manufacturing is expected to stay in focus after the stock shares jumped over 10% on news that Warren Buffet’s Berkshire Hathaway took an around $5 billion stake in the company.

“Investors concluded that Buffet thinks that the selloff may have hit a bottom after a nearly 60% dive since the beginning of the year, which wiped out $250 billion in value, said Ozkardeskaya. 

On the economic data front, focus will be on US retail sales figures for October due at 8.30am ET.

Contact the author at jon.hopkins@proactiveinvestors.com

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