Oil, CPI jitters

Latest readings on consumer prices, oil inventories likely to set path for stocks in early trading.

May 18, 2005: 7:09 AM EDT

NEW YORK (CNN/Money) - The latest inflation reading and oil prices could send stocks lower at the start of trading Wednesday.

U.S. stock futures were down at 7 a.m. ET, indicating a lower opening for stocks, although that could be changed by a pre-market report on prices paid by consumers.

The Consumer Price Index is seen increasing 0.4 percent for April after a 0.6 percent rise in March, according to economists surveyed by Briefing.com. The core CPI, which strips out often-volatile food and energy prices, is expected to up 0.2 percent after a March increase of 0.4 percent. (Divulgado às 13:30)


On Tuesday, the Producer Price Index, which measures wholesale prices, came in above expectations.

Oil prices were higher in early trading Wednesday ahead of the weekly inventory report, following a slight gain in trading Tuesday.

The June light crude contract gained 18 cents to $49.15 a barrel in electronic trading, while the July contract for Brent crude rose 31 cents to $49.65.

The lower futures are just another sign of the underlying wariness in markets, said David Kelly, economic adviser for Putnam Investments. He said the strong market gains Tuesday are difficult to sustain, even with good economic or earnings news.

"It's the opposite of the frenzy of a bull market," he said. "There's no reason for the market to be down except for the nervous among investors."

Kelly said with oil prices sharply below levels of a month ago, there should be reassurance for investors even if the CPI ends up higher than forecasts. And he believes oil should be poised for even further declines.

"Given the level of inventories, even if inventories were to fall in the report today, it's still not reasonable that prices are near $50," he said.

Major markets in Asia closed mostly higher Tuesday, although Hong Kong's Hang Seng lost ground as U.S. and Chinese officials sparred over the value of the yuan. Major European markets were higher in early trading.

Treasury prices were slightly lower, raising the yield on the 10-year note to 4.12 percent from 4.11 percent late Tuesday. The dollar lost ground on the euro and the yen.

In corporate news, computer and peripheral maker Hewlett Packard (Research) reported strong fiscal second-quarter results, although its outlook for the current period was a touch below current consensus.

The stock of the Dow component rallied in after-hours trading and was up 5 percent in European trading early Wednesday as new CEO Mark Hurd had a strong debut, reporting improved operations in some formerly troubled units.