Mother Nature is playing a cruel seasonal joke on a good part of the country, dumping lots of snow at a time when visions of cherry blossoms, azaleas, and Spring Break have been dancing in plenty of heads. That is disrupting a lot of business and travel plans; in turn, it is expected to lead to reduced trading activity in the capital markets considering New York City is being wrapped in Mother Nature's wintry embrace.
How much of a role Winter Storm Stella is having on the futures trade is hard to say. The S&P futures are down eight points and are trading 0.3% below fair value.
Some of that weakness could be attributed to thin trading conditions, yet it may not be all of Mother Nature's doing.
Some other natural forces could be at work, namely the CBO's estimate of the budgetary effects of the American Health Care Act put forth by the House GOP.
Some positive assessments provided by the CBO include the thinking that the House GOP plan would reduce federal deficits by $337 billion over the 2017-2026 period and reduce overall premiums by roughly 10% by 2026 in the individual market.
The negative aspect of the CBO's assessment is that the plan would leave 14 million more people uninsured in 2018 than under the current law while an estimated 52 million people would be uninsured in 2026 versus 28 million who would be uninsured in 2026 under current law. Additionally, it is said that premiums for older Americans could go up substantially.
Altogether the CBO's assessment of things has kicked up its share of dust (or snowflakes) for politicians and their constituents. The uncertainty over passage of the plan is contributing to some angst that it could forestall the passage of tax reform.
That consideration is likely acting as a headwind this morning along with some saber-rattling from North Korea, the continued drop in oil prices (-$0.66, or 1.4%, to $47.74), and some disappointing retail sales data for January out of China that has mitigated some of the positive response to better-than-expected industrial production and fixed asset investment data.
On a related note, the U.S. Producer Price Index for February produced another upside surprise.
The index for final demand increased 0.3% (Briefing.com consensus +0.1%), led by a 0.4% increase in prices for final demand services. The index for final demand, excluding food and energy, also increased 0.3% (Briefing.com consensus +0.2%).
The key takeaway from the report is that inflation at the producer level is picking up and is feeding concerns about a potential pass-through effect to consumers.
On a year-over-year basis, the index for final demand is up 2.2% on an unadjusted basis, which is the largest 12-month increase since March 2012. The index for final demand, excluding food and energy, is up 1.5% compared to a 1.2% increase for the 12-months ending in January.
There was already little question in the market's mind that the Fed will be raising the target range for the fed funds rate on Wednesday. The PPI report for February won't change anything in that respect.
Corporate news of note is on the light side. One headline drawing a fair bit of attention is the report that Bill Ackman has sold his (losing) stake in Valeant Pharmaceuticals (VRX), telling CNBC he didn't realize how bad the situation was there until he joined the board. He did say, however, that he thinks Valeant has a management team and a capital structure in place now to give the business time to recover.
Shares of VRX are trading 11% lower in pre-market action. That company-specific loss is having little impact on the broader market, which is forlornly waiting for spring amid Mother Nature's cruel winter joke a day in front of the Ides of March and the FOMC decision.