U.S. stocks struggle for direction as traders eye July inflation data

It was the five drop in six sessions for the S&P 500.

What’s driving markets

News of falling consumer prices in China — which fell 0.3% for the year to July — dovetails with the country’s weak trade data released this week and raises concerns that growth is faltering in the world’s second biggest economy.

“China is now witnessing the actual cost of goods both in stores and at the factory gate falling. It is indicative of a significant slowdown in the Chinese economy, which is beset by high levels of indebtedness,” said Steve Clayton, head of equity funds, Hargreaves Lansdown.

However, traders also note that deflationary pressures emanating from China may help further reduce goods inflation in the U.S. and elsewhere, thereby helping central banks to soon stop raising borrowing costs.

The upshot is a mildly positive mood across markets as investors welcome how stocks rallied off Tuesday’s lows, and as they await the July U.S. consumer price index data on Thursday, and producer prices on Friday.

“Markets don’t appear too adventurous ahead of the U.S. CPI; instead, traders are reverting the risk-off trade from overnight markets after yet another August storm front passed. But much of the move is likely pre-U.S. CPI housekeeping, given that stocks, bonds and currency markets react wildly to CPI beats and misses,” said Stephen Innes, managing partner at SPI Asset Management.

Helping support sentiment was a better showing in Europe, where Italian banks led the sector higher after Rome watered down its windfall tax proposals.

Meanwhile, the second quarter corporate earnings season continues, with Roblox
RBLX,
-20.51%,
Penn Entertainment
PENN,
+7.21%,
Wynn Resorts
WYNN,
-0.93%
and Walt Disney
DIS,
-0.71%
presenting their numbers. Penn Entertainment stock surged after agreeing on a sports-bet partnership with Disney’s ESPN.

There are no major U.S. economic data due on Wednesday.

Companies in focus

• Lyft Inc.
  LYFT,
  -6.96%
  fell 8% Wednesday after the ride sharing service reported quarterly results.

• Carvana Co.’s stock
  CVNA,
  -4.62%
  was up 5.6% in Wednesday’s premarket trading after the used-car retailer revised its outlook.

• Roblox Corp.
  RBLX,
  -20.51%
  shares fell 19% after the gaming company fell short of bookings expectations for the second quarter and saw its losses swell.

• Penn Entertainment Inc. shares
  PENN,
  +7.21%
  jumped 12.6% after the company reached a deal with Walt Disney Co.’s ESPN to rebrand Penn’s sportsbook as ESPN Bet. Shares of sports-betting rival DraftKings Inc.
  DKNG,
  -9.90%
  were down 6%, and FanDuel owner Flutter Entertainment
  FLTR,
  -3.96%,
  which also reported results, slumped in London trade.

• Wendy’s Co. 
  WEN,
  -0.30%
  slipped 0.5% in premarket trading Wednesday, after the fast-food burger chain reported second-quarter profit that topped expectations but revenue that came up shy, while affirming the full-year outlook.

• Rivian Automotive Inc.
  RIVN,
  -8.23%
  shares fell 1% on Wednesday after the EV maker reported a narrower-than-expected quarterly loss, revenue that beat Wall Street expectations, and called for higher production numbers this year.