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Briefing.com Summary:
*August CPI was hotter than expected, up 0.4% month-over-month.
*Initial jobless claims hit their highest level since October 2021.
*The stock market is indicated to open higher, with rate cut optimism driving things.
Today is the 24th anniversary of 9/11, which makes anything else that happens in the capital markets today seem trivial. Be that as it may, the capital markets will be at work today, doing what they always do: processing news and data and discounting the implications of that news and data in individual stocks, bond prices, commodity prices, and currencies.
It just so happens that there are a few key pieces of data to process on this solemn day. That would be the August Consumer Price Index (CPI), which comes on the heels of yesterday's inflation-friendly Producer Price Index (PPI) that sat side-by-side with Oracle (ORCL) as a driver of record highs for the Nasdaq and S&P 500, and the weekly Initial and Continuing Jobless Claims report.
Neither piece of data was as uplifting as one would hope. CPI inflation was hotter than expected month-over-month, and initial jobless claims hit their highest level since October 2021.
That is a combination that, ostensibly, should foment stagflation concerns; however, Treasuries have rallied in the wake of the data, focusing on the noticeably higher initial jobless claims print as a basis for the Fed to cut rates aggressively in the near term. That effectively means three rate cuts before the end of the year, and that is what has been priced into the fed funds futures market.
Looking closer at the data, total CPI was up 0.4% month-over-month (Briefing.com consensus 0.3%) following a 0.3% increase in July. Core CPI, which excludes food and energy, was up 0.3%, as expected, following a 0.3% increase in July.
On a year-over-year basis, total CPI was up 2.9%, versus 2.7% in July, while core CPI was up 3.1%, unchanged versus July and still well above the Fed's 2.0% inflation target (specifically for PCE inflation).
The key takeaway from the report (for Main Street) is that food prices were starkly elevated in August (+0.5%), as were shelter (+0.4%), apparel (+0.5%), transportation services (+1.0%), and gasoline (+1.9%) prices.
Notwithstanding the inflation news, Treasury yields moved lower following the releases. The basis for that move was the initial jobless claims reading, which is a leading indicator.
Specifically, initial jobless claims for the week ending September 6 spiked by 27,000 to 263,000 (Briefing.com consensus: 240,000). Continuing jobless claims for the week ending August 30 were 1.939 million, unchanged from the prior week.
The key takeaway from the report is rooted in the eye-opening initial jobless claims print, which will be construed in the market's mind as a weakening labor market signal and another basis for the Fed to cut rates in September, as well as in October and December.
The 2-yr note yield is down two basis points to 3.51%, and the 10-yr note yield is unchanged at 4.03% after skimming 4.06% overnight.
In other news, the ECB voted to keep its corridor of key policy rates unchanged, as expected.
Currently, the S&P 500 futures are up 18 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 80 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 135 points and are trading 0.3% above fair value.
