Day one of Fed Chair Yellen's semiannual monetary policy report to Congress went swimmingly for the stock and bond markets, as participants relished her view that the federal funds rate would not have to rise all that much further to get to a neutral policy stance.
Stocks rallied, and bonds did as well, on the assumption that there is going to be a low glide path to future rate hikes and that, perhaps, the next rate hike might wait until sometime in 2018.
That happy feeling is subject to change as future data are released, but as far as yesterday was concerned, Ms. Yellen did not sound as hawkish as some had feared she might sound, so her remarks were characterized as being a pleasant surprise.
She'll continue her testimony today in front of the Senate Banking Committee at 10:00 a.m. ET. The market isn't expecting any "walk back" remarks or new surprises, so it could be an understated affair. Nonetheless, market participants can never afford not to pay attention when the Fed chair is opining on matters pertaining to monetary policy.
Such matters involve today's economic releases, which included the Producer Price Index (PPI) and the weekly Initial Claims Report.
PPI for final demand increased 0.1% in June (Briefing.com consensus -0.1%) while core PPI, which excludes food and energy, also increased 0.1% (Briefing.com consensus +0.2%).
The uptick in June was related almost entirely to the 0.2% increase in the index for final demand services, which accounted for 80% of the rise in the final demand index. The index for final demand goods edged up 0.1%.
On a year-over-year basis, the final demand index advanced 2.0%, versus 2.4% in May, while the index for final demand excluding food and energy increased 1.9% compared to 2.1% for the 12-month period ending in May.
The key takeaway from the report is that producer price trends are also seeing some disinflation, which will likely keep the Fed in observation mode, as opposed to action mode, when it comes to the policy rate.
Initial claims for the week ending July 8 decreased by 3,000 to 247,000 (Briefing.com consensus 245,000) and continuing claims for the week ending July 1 decreased by 20,000 to 1.945 million.
There were no special factors influencing the initial claims reading, which held below 300,000 for the 123rd consecutive week. The key takeaway there is that a low level of initial jobless claims reflects a tight labor market.
The futures market didn't react much to the data, which by and large reinforced prevailing expectations in front of the reports.
Currently, the S&P futures are up two points and are trading 0.1% above fair value while the Nasdaq 100 futures are up five points and are trading 0.2% above fair value.
The cash market, then, is projected to start today's session on a modestly higher note.
Target (TGT) should buck that trend. Its stock is trading 6% higher in pre-market action after the retailer raised its second quarter earnings per share and comparable sales guidance, citing improved traffic and category sales trends. Target's news could give a boost to other retailers that have been beaten down by competitive pressures flowing from Amazon (AMZN).
In other developments, the Senate GOP is expected to release a revised health care bill today and China reported some better-than-expected trade data for June, registering an 11.3% year-over-year increase in exports and a 17.2% year-over-year increase in imports.
China's trade report has been interpreted as a relatively good sign for the global economy.
The latter view notwithstanding, market bulls are holding their enthusiasm for now, cognizant perhaps that the stock market has had a hard time following up a good session with another.
Today, there will be a chance for follow up, and like past days, the direction the technology and financial sectors take will set the tone for the direction the broader market takes.