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Last Updated: 18-Mar-26 09:04 ET | Archive
Latest PPI report upsets the inflation apple cart
Briefing.com Summary:
*Oil prices remain a source of volatility for the stock market.
*The February Producer Price Index was not an inflation-friendly report. Equity futures deteriorated in its wake.
*The intrigue with respect to today's FOMC meeting revolves around the SEP and Fed Chair Powell's press conference.
Oil prices have been a source of volatility for the stock market. Today is no different. Oil prices are bobbing up and down as traders fish for some certainty about oil supplies passing through the Strait of Hormuz.
That certainty remains evasive. There is some added hesitancy, too, with the FOMC decision and Summary of Economic Projections (SEP) being released at 2:00 p.m. ET and followed by Fed Chair Powell's press conference at 2:30 p.m. ET.
One thing that is certain in the market's mind is that the Fed will vote to leave the target range for the fed funds rate unchanged at 3.50-3.75%. The intrigue with this meeting revolves around the SEP and what it will show for the Fed's forecast for inflation and policy path, and how Fed Chair Powell communicates it all during his press conference.
The market is seemingly braced for a more cautious-minded Fed when it comes to cutting rates in light of the surge in energy prices and the ongoing war with Iran. The February Producer Price Index is only going to add to that perspective.
The Producer Price Index for final demand increased 0.7% month-over-month (Briefing.com consensus: 0.3%) following a 0.5% increase in January. The Producer Price Index for final demand, less foods and energy, jumped 0.5% month-over-month (Briefing.com consensus: 0.4%) following a 0.8% increase in January.
On a year-over-year basis, the Producer Price Index for final demand was up 3.4%, versus 2.9% in January, and the Producer Price Index for final demand, less foods and energy, was up 3.9%, versus 3.6% in January.
The key takeaway from the report is that the uptick in producer prices was seen in both goods (+1.1%) and services (+0.5%), and the added point is that this higher inflation occurred before the war with Iran and subsequent surge in energy prices, which will foment concerns about a worsening inflation situation.
Treasury yields have moved higher in the wake of the report. The 2-yr note yield, at 3.68% before the report, is at 3.72% now, and the 10-yr note yield, at 4.19% before the report, is at 4.22% now.
The equity futures market, which had shown some deterioration from higher levels before the PPI data came out, has devolved into a weaker state in the wake of the report.
The S&P 500 futures are down 31 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 114 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 252 points and are trading 0.5% below fair value.
This reaction is tied up in macro matters, which is why the earnings reports from the likes of lululemon (LULU), DocuSign (DOCU), General Mills (GIS), Macy's (M), and Jabil Circuit (JBL) are taking a backseat from a market-moving standpoint.
What is moving the market now is a budding concern about stagflation and a flourishing realization that the next rate cut is on a path to happening later rather than sooner.
