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There was a needed bounce in the mega-cap stocks yesterday that infused the market cap-weighted indices with a little energy; however, the buying interest was not widespread. The equal-weighted S&P 500 declined 0.5% at the same time the market cap-weighted S&P 500 gained 0.5%.
Currently, the S&P 500 futures are down 11 points and are trading 0.2% below fair value, the Nasdaq 100 futures are down 68 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 66 points and are trading 0.1% below fair value.
The follow through thus far today has been lacking -- at least on the buy side of things. Mega-cap stocks are on the softer side of things in general in pre-market trading; and tariff angst, along with growth concerns, have seemingly overshadowed the better-than-expected headline prints for the February Producer Price Index.
Sticking points include:
- Relatively disappointing in-line guidance from Adobe (ADBE) and disappointing guidance from SentinelOne (S) and UiPath (PATH) that has weighed in growth stocks
- Festering worries about consumer spending
- American Eagle Outfitters (AEO), in conjunction with its Q4 earnings report, said Q1 is off to a slow start.
- The Wall Street Journal reported that U.S. convenience store sales volume was down 4.3% in the year ended February 23 as consumers cut back on discretionary purchases.
- An IEA report pointed to souring macro sentiment and escalating trade tensions as a basis for declining oil prices in February and early March.
- President Trump has threatened a 200% tariff on EU wines and champagne in response to the whiskey dispute.
- The specter of a government shutdown looms after Senate Minority Leader Schumer said late yesterday that the Senate won't have the votes to pass the House's continuing resolution.
The February Producer Price Index was its own sticking point. There was good news on the headline side of things. Total PPI was unchanged month-over-month (Briefing.com consensus 0.3%) following an upwardly revised 0.6% increase (from 0.4%) in January, and core PPI, which excludes food and energy, was down 0.1% month-over-month (Briefing.com consensus 0.3%) following an upwardly revised 0.5% increase (from 0.3%) in January.
On a year-over-year basis, total PPI was up 3.2%, versus 3.7% in January, and core PPI was up 3.4% versus 3.8% in January.
The key takeaway from the report is comparable to the key takeaway from the CPI report: inflation at the wholesale level, while improving, is still too high, and with the tariff battles heating up, there is concern that the disinflation isn't going to persist.
Tellingly, the 2-yr note yield is up one basis point to 4.00% and the 10-yr note yield is up one basis point to 4.33% after the ostensibly good inflation news in the February Producer Price Index.
