The Nasdaq Composite hit a new record high on Monday, but other than that, there wasn't much trading excitement in the stock market. Following on the heels of Friday's celebration of the February employment report, the broader market had a bit of a hangover.
It has some vitality today, however.
The S&P futures are up 10 points and are trading 0.4% above fair value. The Nasdaq 100 futures are up 27 points and the Dow Jones Industrial Average futures are up 81 points.
The implication is that the cash market is on track to start today's trading on a distinctly higher note. That was in question before the release of the Consumer Price Index (CPI) for February at 8:30 a.m. ET, yet market participants liked what they saw in that report since it was what they expected to see.
The CPI increased 0.2% (Briefing.com consensus +0.2%) after increasing 0.5% in January. Increases in the indexes for shelter, apparel, and motor vehicle insurance contributed to the gain. The food index was unchanged while the energy index increased slightly.
Core CPI, which excludes food and energy, also increased 0.2% (Briefing.com consensus +0.2%) following a 0.3% increase in January.
With those monthly changes, total CPI was up 2.2% for the 12 months ending February, up from 2.1% for the 12 months ending January. Core CPI, meanwhile, was up 1.8%, which was unchanged from the 12 months ending January.
The key takeaway for market participants is that the consumer inflation trend is not accelerating in a worrisome fashion; therefore, they are feeling less worried about the prospect of the Federal Reserve raising the fed funds rate more than three times this year.
The S&P futures were up four points just in front of the CPI release, so the positive impact of the report was clear to see. In the same vein, the 10-yr Treasury yield has dropped two basis points to 2.85% while the 2-yr note yield has also fallen two basis points to 2.25%.
Some short-covering action is reportedly helping to drive up bond prices. That makes some sense considering the CPI headlines came across exactly as expected (i.e., they didn't contain any surprises that are the typical drivers of outsized moves).
The corporate news of note this morning involves Broadcom (AVGO) and Qualcomm (QCOM). Those two companies have been directed in a presidential order to "immediately and permanently abandon" the proposed takeover of Qualcomm by Broadcom based on national security interests.
That news broke after yesterday's close and it has been followed by reports this morning that the president has ousted Rex Tillerson as Secretary of State. Mr. Tillerson will be replaced by CIA Director Mike Pompeo.
The latter news slowed some of the post-CPI momentum in the futures market, but it hasn't killed the positive bias altogether since it doesn't qualify as a complete shock based on past reporting of the fractious nature of Mr. Tillerson's relationship with the president.
Separately, there have been several earnings reports. None have market-moving cachet, yet the one from Dick's Sporting Goods (DKS) is being held out as a disappointment. Shares of DKS are down 4.2% in pre-market trading.
The item that matters most, though, is the inflation report since all roads there lead back to the Federal Reserve and the market's thinking that the Federal Reserve can stay the course with a median estimate of three rate hikes in 2018.