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Monday's session lacked energy, something that was evident in the low volume seen at the NYSE and Nasdaq. It also lacked any strong returns, something that was evident in the major indices and which was also reflected in a negative advance-decline line at the NYSE and Nasdaq.
This morning, there is more energy and a semblance of stronger returns that is showing up in the equity futures market.
Currently, the S&P 500 futures are up 33 points and are trading 0.7% above fair value, the Nasdaq 100 futures are up 177 points and are trading 0.9% above fair value, and the Dow Jones Industrial Average futures are up 114 points and are trading 0.3% above fair value.
The positive disposition across the equity futures market is improved from an earlier mixed disposition, which involved some weakness in the Dow Jones Industrial Average futures following an earnings report from Home Depot (HD) that featured better-than-expected fiscal Q2 earnings and revenue but weaker-than-expected EPS and comparable sales guidance for the fiscal year.
The disappointing outlook was linked to a weaker consumer demand environment. Shares of HD had been down more than 2.0% in pre-market action, but they have reversed course and are now indicated to open 0.5% lower.
On any other day, the Home Depot report would be the focal point for the consumer discretionary sector. Today, however, it will need to share the spotlight with the news of CEO changes at Starbucks (SBUX) and Chipotle (CMG).
That change is connected. Starbucks CEO Laxman Narasimhan stepped down and will be replaced by Chipotle CEO Brian Niccol. This news is a huge caffeine boost for SBUX, which is up 14% in pre-market trading, and a rotten avocado for CMG, which is down 7.4%.
Separately, the hubbub in the consumer discretionary sector should not distract from the good inflation news that was embedded in the July Producer Price Index and gave the equity futures market a nice lift.
The Producer Price Index for final demand increased 0.1% month-over-month in July (Briefing.com consensus 0.1%). The index for final demand, less foods and energy, was flat (Briefing.com consensus 0.2%) following a downwardly revised 0.3% increase (from 0.4%) in June.
On a year-over-year basis, the index for final demand was up 2.2% versus 2.7% in June. The index for final demand, less foods and energy, was up 2.4% versus 2.9% in June.
The key takeaway from the report is the disinflation trend in total and core PPI, as that is moving in a necessary direction to drive a rate cut by the Fed.
The 2-yr note yield is down four basis points to 3.98% and the 10-yr note yield is down three basis points to 3.88%. Most of the gains in the Treasury market were established before the 8:30 a.m. ET release, as some weak new loan data for July out of China, weaker-than-expected ZEW economic sentiment data out of the eurozone, and simmering concerns over the Middle East situation drove overnight buying interest.
