Fedspeak, U.S. retail sales, U.K. inflation, Apple stake - what's moving markets

By Peter Nurse

Investing.com -- The U.S. consumer price report has caused a rethink of the level at which the Federal Reserve will stop its interest rate hikes, and Wall Street is set to open lower as a result. Retail sales will be studied, while Apple will be in the spotlight after Warren Buffett expanded his stake in the iPhone maker. U.K. inflation surprised on the downside while surging U.S. crude inventories have hit the oil market. Here's what you need to know in financial markets on Wednesday, 15th February.

1. U.S. CPI prompts Fed peak reset

U.S. inflation proved to be stickier than expected in January, with the headline consumer price index rising 6.4% on the year, instead of the expected 6.2%.

The reading gives the Federal Reserve more impetus to keep hiking interest rates in the near term, prompting the market to shift higher its estimate of what level the U.S. central bank ends its series of interest rate hikes.

The Fed lifted its target rate by a quarter of a percentage point to the 4.50-4.75% range at the start of this month.

New York Federal Reserve President John Williams said on Tuesday a federal funds rate this year of between 5.00% and 5.25% "seems a very reasonable view," but also noted after the CPI release that "our work is not yet done," adding that "we will we stay the course until our job is done."

Richmond Fed President Thomas Barkin stated that "if inflation persists at levels well above our target, maybe we’ll have to do more," while Federal Reserve Bank of Dallas President Lorie Logan said, "we must remain prepared to continue rate increases for a longer period than previously anticipated."

Officials in December penciled in a peak interest rate of just over 5% this year, but this looks likely to head higher in March.

2. Buffett takes another bite of Apple

The sage of Omaha has spoken, and it's good news for Apple (NASDAQ:AAPL).

Warren Buffett's investment vehicle, Berkshire Hathaway (NYSE:BRKa), has rejigged its holdings, according to regulatory filings, buying another 20.8 million Apple shares, worth $3.2 billion, raising its stake to 5.8%.

Buffett has previously called Apple one of the four "giants" at his conglomerate, approving of the iPhone maker 's stock repurchase strategy and is its largest shareholder, outside of index and exchange-traded fund providers.

On the flip side, Berkshire Hathaway slashed its stake in Taiwanese contract chipmaker TSMC (NYSE:TSM), just three months or so after it bought more than $4.1B worth of stock of the world's largest contract chipmaker.

3. U.S. stocks to open lower; retail sales due

U.S. stock markets are set to open lower Wednesday as investors digest the slightly higher-than-expected rise in the consumer price index [see above] ahead of the latest retail sales, a gauge of how consumers are holding up.

By 06:00 ET (11:00 GMT), Dow Jones futures were down 85 points or 0.3%, S&P 500 futures were down 0.3%, and Nasdaq 100 futures were down 0.5%.

The retail sales report for January is due out at 08:30 ET (13:30 GMT) and is expected to show the monthly reading rising 1.8% from December after falling 1.1% the prior month.

Quarterly results are expected from the likes of Biogen (NASDAQ:BIIB), Kraft Heinz (NASDAQ:KHC), Cisco (NASDAQ:CSCO) and Shopify (NYSE:SHOP), while Airbnb (NASDAQ:ABNB) stock soared premarket after the house rental company beat fourth quarter estimates on both the top and bottom lines, and provided healthy guidance as healthy demand for travel underpinned bookings.

Similarly, TripAdvisor (NASDAQ:TRIP) stock rose premarket after the online travel company produced strong quarterly numbers, with travelers looking to spend money on experiences.

4. U.K. inflation eases pressure on Bank of England

While U.S. inflation proved resilient in January, data released earlier Wednesday showed that British inflation fell by more than expected in the same month, admittedly from a higher base.

The U.K. CPI rose 10.1% from a year ago in January, the lowest since September, and down from 10.5% the month before.

This figure is still more than five times above the Bank of England's targeted level, suggesting more monetary tightening is still likely.

However, this release backs up the comments from the U.K. central bank earlier this month that it saw signs that the surge in consumer prices had turned a corner, so perhaps it is moving close to ending its run of interest rate hikes.

5. Crude slumps as U.S. inventories surge

Crude oil prices slumped Wednesday after an industry report pointed to a hefty jump in U.S. inventories, raising fears about a drop-off in demand at the world's largest consumer.

The American Petroleum Institute reported that U.S. crude stocks rose by a massive 10.5M barrels last week, much more than expected.

The official numbers from the Energy Information Administration are due later in the session and will be studied for confirmation.

However, there was some good news for the market Wednesday, as the International Energy Agency boosted forecasts for global oil demand as China reopens its economy following years of anti-COVID lockdowns.

"World oil supply looks set to exceed demand through the first half of 2023, but the balance could quickly shift to deficit as demand recovers and some Russian output is shut in," the agency said.

By 06:00 ET, U.S. crude futures were down 1% at $78.25 a barrel, while Brent crude was down 0.8% at $84.88 a barrel.

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