The S&P 500 finished Wednesday up one point, or 0.04%, with participants aware of reports that the U.S. was looking to reengage China on trade talks. It was a welcome improvement from session lows, yet the one-point gain didn't necessarily connote an overwhelming sense of optimism about the proposed trade conversation.
We point that out because the S&P futures are up 10 points this morning, and are trading 0.3% above fair value, bolstered reportedly by the enthusiasm that China is welcoming the opportunity to talk trade. The Nasdaq 100 futures are up 38 points and the Dow Jones Industrial Average futures are up 106 points.
The assumption is that it might be possible to avert the implementation of tariffs on $200 billion worth of Chinese imports if the talks go well.
That is one point of headline relief for the time being. Another point of headline relief is the word that Hurricane Florence has been downgraded to a Category 2 storm from a Category 4 storm.
The downgrade relates mostly to wind speed, yet there has been no change to the forecast for a major storm surge and most likely record flooding. In other words, Florence is still packing a very destructive punch and people in its path should not grow complacent on account of the downgrade.
That public service message aside, oil prices ($69.44, -$0.93, -1.3%) have tapered off some as a result of the downgrade, as well as a report from the IEA that global oil supply hit a record 100 million barrels per day in August despite the production problems in Venezuela and the impending sanctions on Iran.
The third point of relief was the Consumer Price Index (CPI) for August, which didn't contain any negative headline surprises.
Total CPI increased 0.2%, as expected, while core CPI, which excludes food and energy, increased 0.1% (Briefing.com consensus +0.2%).
The key takeaway for the market is that there was a moderation in the year-over-year growth rates for total CPI and core CPI. That won't alter the prevailing view that the Federal Reserve is likely to raise rates two more times this year, yet the moderation is apt to be seen as a data point that could keep the Federal Reserve from tightening rates too rapidly.
The bump in total CPI in August was driven by the indexes for shelter (+0.3%) and energy (+1.9%). Core CPI was pushed up primarily by the shelter index, yet a 1.6% decline in the apparel index and a 0.2% decline in the medical care index helped hold things in check.
On a year-over-year basis, total CPI was up 2.7%, versus 2.9% in July, and core CPI was up 2.2% versus 2.4% in July, which stood as the largest 12-month increase since September 2008.
In other developments, the ECB and the Bank of England both kept their key policy rates unchanged, as expected. The Central Bank of Turkey, on the other hand, raised its key rate by 6.25% to 24.00%. That rate hike was an act of relief for the beleaguered Turkish lira.
There was some relief today, too, for Hong Kong's Hang Seng Index (+2.5%) and China's Shanghai Composite (+1.2%), both of which bounced back from increased selling pressure of late.
The same can't be said at the moment for shares of Kroger (KR), which are down 8.5% in pre-market action after the grocery retailer came up shy of second quarter same-store sales estimates.
Kroger's problems, though, are company specific. The broader market for its part smells a good bit of headline relief and will move up nicely at the open as a result of it.