While you were sleeping: Stocks rebound ahead of inflation, retail sales data

Stocks on Wall Street rebounded into positive territory halfway through a session dominated by bets on forthcoming US consumer price and retail sales data, both due on Wednesday (US time).

At the close of trading in New York, the Dow Jones Industrial Average rose 39.18 points, or 0.16%, to 26,640.45. The Nasdaq Composite Index gained 0.45% to 7013.51 and the Standard & Poor's 500 Indexrose 0.26% to 2662.94.

"Investors are probably positioning with a bit of a risk-off mindset going into those two [reports] tomorrow," Matt Miskin, market strategist at John Hancock Investments, told Reuters.

"The core CPI estimate is a modest decrease from last month," he noted. "But in the event that inflation does accelerate, that could lead volatility to continue as the Goldilocks environment may be under further pressure."

The Dow fell as much as 180 points early in the session before recovering. Despite this swing, investors appeared to avoid making any drastic trades ahead of the Bureau of Labor Statistics report.

Further evidence of inflation will likely prolong the market selloff, similar to how strong wage growth in January pressured US bonds ahead of last week’s correction.

Investors are reducing risk by rotating into cash and out of equities, according to the February survey of global fund managers by Bank of America Merrill Lynch The survey also noted a record one-month jump in the percentage of investors indicating they have taken out protection against a sharp fall in equity markets in the next three months.

The moves follow last week’s large plunge when the S&P 500 fell more than 5% in a broad selloff sparked by signs of increasing inflation and rising bond yields. Bets on continuing low market volatility were upended, with the Cboe Volatility Index, or VIX, a measure of expected swings in the S&P 500, ending the week up nearly 70%. It was up 2.5% to 26.24 at mid-session.

Lacklustre trend
Bucking the generally lacklustre trend, athletic-wear company Under Armour jumped 13.2% after posting quarterly results that surpassed expectations, bolstered by a jump in overseas sales. Some remained cautious about the company's outlook.

"While investors may cheer the modest upside on Under Armour's top line and 2018 guidance that looks pragmatic, the fourth quarter provides a stark reminder that the company has a long road ahead of it," William Blair analyst Sharon Zackfia said in a note, Reuters reported.

PepsiCo seesawed after the beverage and snack company reported quarterly profit and sales that bettered analysts' expectations as increased appetite for its Frito-Lay products outweighed a drop in demand for its drinks.

PepsiCo will increase its dividend payment by 15% and plans to buy back up to $US15 billion of its shares, it said in a statement.

"We met or exceeded most of the financial goals we set out at the beginning of the year," chief executive officer Indra Nooyi said in the statement.

"We delivered these results in the midst of a dynamic retail environment and rapidly shifting consumer landscape."

Also dealing with shifting consumer tastes, McDonald's is aiming to become a "credible chicken player" in the US, according to internal McDonald's documents reviewed by Bloomberg.

The initiative has been dubbed "Better Chicken," the fast-food giant said in a letter to franchisees, who operate about 90% of its US locations, Bloomberg reported.

"It's definitely a transformational era for McDonald's," Jason Moser, an analyst at Motley Fool, told Bloomberg. "Chicken is part of that."

In Europe, the Stoxx 600 Index fell 0.6%. Germany's DAX Index shed 0.7%, France's CAC40 Index declined 0.6% the UK's FTSE 100 index slipped 0.1%.

(BusinessDesk)