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The stock market showed some rebound fight yesterday, but it ultimately suffered another technical knockout. It got back on its feet this morning ahead of the 8:30 a.m. ET release of the February Consumer Price Index (CPI).
It did so aided by the following influences:
- An expectation that the market is primed for a bounce given the speed and scope of recent losses (at its low yesterday, the S&P 500 briefly entered into "correction territory," defined as a 10%+ pullback from the prior high it reached on February 19).
- Rebound action in the mega-cap stocks, which have been among the hardest hit stocks during the sell-off.
- The prospect of a Ukraine-Russia ceasefire agreement.
- The House passed a continuing resolution (217-213) that will fund the government through September 30; the bill now heads to the Senate where it will need to pass to avert a government shutdown after March 14.
- The MBA's weekly Mortgage Applications Index increasing 11.2%, demonstrating how lower mortgage rates can stoke refinancing and purchase application interest.
Despite the sunny disposition in the equity futures market, the skies weren't exactly all clear.
- The 25% tariff rate on steel and aluminum imports goes into effect today.
- The European Commission announced countermeasures on up to EUR26 billion of exports to the U.S. in response to the steel and aluminum tariffs.
- Goldman Sachs cut its year-end price target for the S&P 500 to 6,200 from 6,500.
The February CPI brought some headline sunshine. Total CPI, tempered by a 0.1% decline in new vehicle prices, was up 0.2% month-over-month (Briefing.com consensus 0.3%) following a 0.5% increase in January. Core CPI, which excludes food and energy, was also up 0.2% month-over-month (Briefing.com consensus 0.3%) following a 0.4% increase in January.
On a year-over-year basis, total CPI was up 2.8%, versus 3.0% in January, and core CPI was up 3.1%, versus 3.2% in January.
The key takeaway from the report is that inflation overall is still sticking comfortably above the Fed's 2.0% target, and now with tariff actions ramping up -- and "reciprocal tariffs" coming April 2 -- confidence has been shaken that future inflation reports will convey undeniably pleasing inflation data.
The 2-yr note yield is up two basis points to 3.96% and the 10-yr note yield is up two basis points to 4.31%. On a related note, there is a $54 billion 10-yr note auction today with results announced at 1:00 p.m. ET, shortly before the release of the February Treasury Budget at 2:00 p.m. ET.
The equity futures market saw a knee-jerk spike on the CPI headlines. The Dow Jones Industrial Average futures were up more than 500 points. Things have settled back a bit, yet the early gains remain solid.
Currently, the S&P 500 futures are up 64 points and are trading 1.1% above fair value, the Nasdaq 100 futures are up 303 points and are trading 1.6% above fair value, and the Dow Jones Industrial Average futures are up 278 points and are trading 0.7% above fair value.
That leaves the major indices in-line for a higher start, but of course that means little for a market that is pining for a higher finish and a day of trading that is devoid of selling into strength.
