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Briefing.com Summary:
*The October PPI report brought some initial headline relief but there was more to the report.
*NVIDIA is up 2.2% in pre-market trading.
*The 10-yr note yield is at 5.15% in some roller-coaster trading action.
This week has felt like Forrest Gump's proverbial box of chocolates. You never know what you're going to get.
There have been big gains and big losses. Oil prices have come down. Bond yields have gone up. The dollar has strengthened. The AI trade has been laid to rest because of NVIDIA (NVDA), and the AI trade has been resurrected in spite of NVIDIA.
What we get today is anyone's best guess, but net-net, the major indices and most of the 11 economic sectors are on track to score some solid gains this week, thanks largely to the big gains registered in Monday's trade.
The gains are going to be padded at today's open.
Currently, the S&P 500 futures are up 30 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 31 points and are trading 0.2% above fair value, and the Dow Jones Industrials Average futures are up 200 points and are trading 0.4% above fair value.
The equity futures market saw a nice pop in the wake of the October Producer Price Index report that was better-than-feared at the headline level, but not necessarily as comforting as it appeared when taking into account the upward revisions for September that neutralized the October headline relief.
The Producer Price Index for final demand was up 0.3% month-over-month (Briefing.com consensus: 0.4%) following an upwardly revised 1.4% increase (from 1.3%) in September. Excluding food and energy, the index for final demand rose 0.3% month-over-month, as expected, following an upwardly revised 0.8% increase (from 0.7%) in September.
On a year-over-year basis, the index for final demand was up 6.5%--the largest increase since November 2022--versus 6.3% in September. Excluding food and energy, the index for final demand was up 5.0%, unchanged from September.
The key takeaway from the report is that inflation at the wholesale level is still a big problem. The October report is not the source of comfort the initial reaction has made it out to be.
The move in the equity futures market was helped by a knee-jerk drop in Treasury yields. The 2-yr note yield went from 4.87% to 4.83% but is now back at 4.87%. The 10-yr note yield dropped from 5.15% to 5.11% but is now back at 5.15%, digesting the take from New York Fed President Williams (FOMC voter) that the Fed will need to take further actions to get inflation back down to the 2% target.
We're not sure the stock market can completely divorce itself from the Treasury market, particularly if yields keep rising, but it is doing what it can to disassociate itself for now. A 2.2% gain in NVIDIA and some positive commentary on AI demand from Cisco (CSCO), Applied Materials (AMAT), and Cerebras Systems (CBRS) has kept some life in the AI trade.
Even so, we wouldn't expect a chocolatey-smooth session.
