The stat line this morning looks a lot like the stat line yesterday morning. Equity futures are down, the CBOE Volatility Index is up 12%, gold prices are up 0.7%, and all road signs point to North Korea for those directional biases.
It would be remiss not to add that the S&P 500 finished yesterday flat, rebounding from the early losses associated with the U.S.-North Korea combative jawboning and the heightened sense of geopolitical angst produced by it.
North Korea has stoked the fire (and fury) again, having reportedly released planning details for the launch of four missiles toward Guam (which would travel over Japan) and saying a final plan for Kim Jong-Un's approval should be ready by mid-August.
There are questions as to whether North Korea will really follow through with this launch, yet that is beside the point today.
The point today is that its fiery rhetoric is not helping to resolve the diplomatic tension, so that again offers a ready excuse for investors to take some money off the table or at least to hold their buying firepower for the time being in a market many think is due for a pullback anyway.
An interesting sidenote is that the there wasn't any rush to safety this morning in the Treasury market. With the futures at their lows of the morning around 7:15 a.m. ET, the 10-yr Treasury note was unchanged.
Buying interest in the Treasury market has perked up a bit since then, yet that hasn't had anything to do with North Korea. Rather, it can be attributed to the Producer Price Index (PPI) report for July, which was weaker than expected.
The key takeaway from the report is that the downturn in producer prices will presumably keep a lid on consumer inflation expectations.
The PPI for final demand declined 0.1% in July (Briefing.com consensus +0.2%) while the index for final demand less foods and energy ("core PPI") also declined 0.1% (Briefing.com consensus +0.2%).
Prices for final demand services fell 0.2% and accounted for more than 80% of the decrease in final demand prices. Prices for final demand goods slipped 0.1%.
On a year-over-year basis, the index for final demand is up 1.9% versus a 2.0% increase for the 12 months ending in June. The index for final demand less foods and energy is up 1.8% versus 1.9% for the 12 months ending in June.
Separately, initial claims for the week ending August 5 increased by 3,000 to 244,000 (Briefing.com consensus 240,000) while continuing claims for the week ending July 29 decreased by 16,000 to 1.951 million.
There are no new takeaways from those data series, which remain at low levels reflective of a tight labor market.
In other developments, department store retailers Kohl's (KSS) and Macy's (M) reported their quarter results this morning. Both retailers topped lowered expectations despite a lack of sales growth, yet the response to the reports has been mixed. KSS is down 2.7% (after increasing 14% over the last month) while M is up 0.5% (after increasing 9% over the last month).
Their reports haven't been strong enough to divert the market's attention away from the geopolitical issues nor to alter the disposition of the equity futures market.
Currently, the S&P futures are down 10 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 38 points and are trading 0.6% below fair value, and the Dow Jones Industrial Average futures are down 51 points and are trading 0.2% below fair value.
It should be a weaker open, then, for the cash market, yet there isn't a sense of sellers launching any big missiles at this point.