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The stock market had a meandering way about it on Wednesday, assessing the in-line (but not necessarily good) October Consumer Price Index and paying heed to rising Treasury yields.
The latter undid a rally effort in the small-cap space. At one point the Russell 2000 was up 1.0%, yet that move came undone as the 10-yr note yield climbed to 4.46% from a post-CPI release low of 4.36%. The Russell 2000 finished the day with a 0.9% loss.
The S&P 500 for its part was flat; the Dow Jones Industrial Average was up 0.1%; and the Nasdaq Composite was down 0.3%, logging its second straight decline (like the Russell 2000).
The latter has stirred some buy-the-dip possibilities along with Dow component Walt Disney's (DIS) well-received earnings report, but at the same time this morning's economic data has caused a stir in the Treasury market that has the 10-yr note yield pushing 4.50%.
The Producer Price Index for final demand increased 0.2% month-over-month in October (Briefing.com consensus 0.2%) following an upwardly revised 0.1% increase (from 0.0%) in September. Excluding food and energy, the index for final demand jumped 0.3% month-over-month (Briefing.com consensus 0.3%) after increasing 0.2% in September.
With these monthly increases, the index for final demand was up 2.4% year-over-year, versus 1.9% in September, and the index for final demand, less food and energy, was up 3.1% year-over-year, versus 3.0% in September.
The key takeaway from the report is that there was inflation in this report -- not disinflation -- at the wholesale level. That will stir concerns about PCE inflation sticking at higher levels and the Fed not cutting rates as much as previously envisioned.
Separately, initial jobless claims decreased by 4,000 for the week ending November 9 to 217,000 (Briefing.com consensus 220,000). Continuing jobless claims for the week ending November 2 decreased by 11,000 to 1.873 million.
The key takeaway from the report is rooted in the low level of initial jobless claims -- a leading indicator -- which suggests employers are feeling reasonably good about the economic outlook, as they appear reluctant to layoff employees.
Unlike yesterday, the Treasury market's first reaction to this data was not good. The 2-yr note yield went from 4.27% to 4.31%. The 10-yr note yield went from 4.43% to 4.48%. Those yields currently sit at 4.28% and 4.46%, respectively.
The jump in market rates tempered some of the buy-the-dip interest availing itself in the equity futures market before the data were released.
Currently, the S&P 500 futures are down two points and are trading fractionally above fair value, the Nasdaq 100 futures are down 23 points and are trading fractionally below fair value, and the Dow Jones Industrial Average futures, helped by a 9% gain in Walt Disney, are up 80 points and are trading 0.2% above fair value.
Like yesterday, the behavior of the Treasury market is expected to factor prominently in the behavior of the stock market. Participants won't want to see the 10-yr note yield eclipse 4.50%, as that has been a doorway for multiple compression over the past 18 months or so.
They will also be taking a keener interest now in the 3:00 p.m. ET speech on the "Economic Outlook" from Fed Chair Powell.
As it stands now, the outlook for today's open for the stock market is mixed.
