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In a trade that had some similarities to Monday's session, the indices started well Tuesday, ran into some selling pressure, and then got back on track. It wasn't a trade of strong conviction; nonetheless, the week-to-date standings for the major indices show gains for each of them.
They are some decent-sized gains, too, in some cases. The Nasdaq Composite is up 2.0%, the S&P 500 is up 1.6%, and the Philadelphia Semiconductor Index is up 3.4%.
Notwithstanding that upside bias, the market doesn't feel "bulled up" so to speak. It feels reflexive, meaning it feels like a conditioned response to buy stocks after a large sell-off. Nothing wrong with that. Traders can see an opportunity and run with it until that opportunity fades away.
This morning, it is fading away just a bit.
Currently, the S&P 500 futures are down three points and are trading fractionally below fair value, the Nasdaq 100 futures are up 23 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are down 133 points and are trading 0.3% below fair value.
Some pundits will try hard to make this into a political trade after last night's presidential debate. The thrust of this morning's action, however, is an economic issue and a policy issue.
Total CPI increased 0.2% month-over-month in August, as expected. Core-CPI, which excludes food and energy, increased 0.3% month-over-month (Briefing.com consensus 0.2%), led by a 0.5% increase in the shelter index. On a year-over-year basis, total CPI was up 2.5% -- the smallest 12-month increase since February 2021. Core-CPI increased 3.2% over the last 12 months, unchanged from July.
The key takeaway from the report is the understanding that core inflation is sticking stubbornly above the Fed's inflation goal of 2.0% which, to be fair, is oriented around the PCE Price Index. Still, the elevated core reading on a monthly and annual basis will be a focal point for the Fed and a likely reason to keep a September rate cut capped at 25 basis points.
Treasuries weakened noticeably following the 8:30 a.m. ET release of the Consumer Price Index. The 2-yr note yield, at 3.58% in front of the release, is at 3.66% now, and the 10-yr note yield, at 3.61% in front of the release, is at 3.67% now.
The U.S. Dollar Index reversed course, bouncing back from early weakness as the yen lost its overnight strength against the greenback following the CPI data.
Thursday's trade will feature the August Producer Price Index. The market will get to that when it gets to it. For now, it needs to work this Hump Day -- and 23rd anniversary of the 9/11 attack -- to get over the hump of the CPI report.
