The afterglow of a seeming rate-cut promise from Fed Chair Powell earlier in the week continues to drive some feel-good sentiment for the stock market. That can be seen in the futures market, which is pointing to a further push into record territory at the start of trading for the Dow Jones Industrial Average and S&P 500.
Currently, the S&P futures are up six points and are trading 0.2% above fair value. The Dow Jones Industrial Average futures are up 73 points and are trading 0.3% above fair value. The Nasdaq 100 futures are up 13 points and are trading 0.2% above fair value.
There's not much more to matters right now than the rate-cut buzz.
There might be some rumblings about the revenue warning from Illumina (ILMN), trade sticking points with China, and squabbling in Congress over the budget and raising the debt ceiling, but at the end of the day, everything has taken a back seat this week to Fed Chair Powell and his dovish-minded testimony.
Maybe things will change next week when second quarter earnings results start hitting the wires with more frequency. Still, it's hard even then to envision the stock market letting go of the Fed put unless the guidance heard during the reporting season is so cautious-minded as to create a countervailing vibe that a rate cut in July isn't going to be enough to turn a slowing economic tide.
Then again, that could just create a stronger expectation for more rate cuts after the July meeting. Que sera sera, but what has been to this point is a stock market that has been fueled by low interest rates and central bank pledges to provide more accommodation if necessary (and increasing hints that they think more will be necessary soon).
The Producer Price Index for June, like the Consumer Price Index for June, didn't exactly support the case for a 50-basis points cut in July. Some might argue, too, that it didn't event support the case for a 25-basis points cut in July, yet that's almost a moot (and mute) argument given the subtext of Mr. Powell's remarks in his semiannual monetary policy testimony.
The index for final demand increased 0.1% m/m in June (Briefing.com consensus +0.1%), held back by a 3.1% drop in the index for final demand energy, while the index for final demand, excluding food and energy, rose 0.3% m/m (Briefing.com consensus +0.2%).
Those readings left the index for final demand up 1.7% yr/yr, versus 1.8% yr/yr in May. That is the lowest 12-month change since January 2017. Core PPI, however, was up 2.3% yr/yr, which was unchanged from May.
The futures market dipped a little bit after the release, as did the Treasury market. Overall, the responses in both markets were pretty limited.