It has been a very good start to the week for the stock market -- perhaps a little too good, which is why some profit taking looks to be kicking in this morning.
Over the course of the past two days, the S&P Midcap 400 Index has risen 1.9%, the Russell 2000 has jumped 1.7%, the Dow Jones Industrial Average and Nasdaq Composite have increased 1.5%, and the S&P 500 has advanced 1.4%.
It has been a bull move predicated on relief that Hurricane Irma wasn't as damaging as feared, that North Korea tensions have gone from boiling to simmering, and that there isn't going to be any budget/debt ceiling drama this month.
The notable takeaway is that the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 are all trading at record highs despite plenty of talk on the edges that the stock market is overvalued.
While interest rates have been rising this week alongside stock prices, they remain quite low and that has continued to fuel the buying interest in equities, particularly at times when a risk-averse mindset has been set aside.
This morning, there is a modicum of risk aversion in play as the S&P 500 flirts with round-number resistance at the 2500 mark and Apple (AAPL) fades after its unveiling of iPhone 8 and iPhone X.
Still, the risk aversion isn't high.
The S&P futures are down three points, the Nasdaq 100 futures are down 11 points, and the Dow Jones Industrial Average futures are down 17 points. That leaves the major indices on track to start the session down between 0.1% and 0.2%.
The 10-yr Treasury yield has slipped one basis point to 2.16%, moving little in the wake of the release of the Producer Price Index (PPI) for August.
That PPI report was weaker than expected from a lead headline perspective, as the index for final demand increased 0.2% month-over-month (Briefing.com consensus +0.3%) while the index for final demand excluding food and energy ("core PPI") increased 0.1% (Briefing.com consensus +0.2%).
The increase in the index for final demand was fueled by a 0.5% increase in prices for final demand goods, most of which stemmed from a 3.3% increase in the index for final demand energy.
On a year-over-year basis, the index for final demand was up 2.4%, versus 1.9% for the 12 months ending in July, while the index for final demand excluding food and energy was up 2.0%, versus 1.8% for the 12 months ending in July.
The key takeaway from the report is that producer prices picked up in August without any full-scale impact from Hurricane Harvey, which will presumably help drive up producer prices in September along with Hurricane Irma. The question, though, is what kind of pass-through effect might there be on consumer prices?
The Consumer Price Index for August will be released on Thursday and will be a focal point for the market with respect to its thinking on the timing of the next rate hike.
For now, market participants will be marking a little time, watching to see how the tape reacts after some opening profit taking. Some will have their eye trained on the retail industry more than others after CNBC reported late yesterday that Nordstrom (JWN) could be moving closer to working out a deal to go private.