Page One
Briefing.com Summary:
*The July PPI report mostly followed CPI form.
*Oil prices have turned down, providing some early support for stocks and bonds.
*The probability of a September rate hike has been further reduced after the PPI report.
There were no "new" surprises in the CPI report yesterday. In fact, there were no surprises in the monthly readings, which lined up with consensus estimates. That left the stock market to go about its business without any new distractions, so it plodded along and flirted with a new record closing high.
Alas, the S&P 500 was stopped short of that record mark but still managed a modest gain with expectations for a September rate hike quieting a bit and oil prices remaining calm.
The market is back at it again today, only this time the focal point is the July Producer Price Index (PPI).
Total PPI was unchanged month-over-month in July (Briefing.com consensus: 0.1%) following an upwardly revised 0.1% decline (from -0.3%) in June. Core PPI, which excludes food and energy, increased 0.2% month-over-month (Briefing.com consensus: 0.3%) following an upwardly revised 0.4% increase (from 0.2%) in June.
Total PPI was up 4.7% year-over-year, down from 5.5% in June. Core PPI was up 4.2% year-over-year versus 4.7% in June.
The key takeaway from the report is that, like the CPI, it was devoid of "new" inflation-baked surprises. Headline and core readings trended in the right direction of disinflation, which is an appeasement for today's trading dynamic, but of course the inflation rates themselves remain on the high side and need to come down much more to appease inflation hawks.
A 2.3% decline in WTI crude futures to $81.27/bbl is a step in the right direction, but only a small step. Nevertheless, that move, which is devoid of a "new" news catalyst, has helped lend some added support ahead of today's opening bell.
Separately, initial jobless claims for the week ending August 8 increased by 9,000 to 209,000 (Briefing.com consensus: 205,000). Continuing jobless claims for the week ending August 1 decreased by 22,000 to 1.777 million.
The key takeaway from the report is the 4-week moving average for initial claims running below 200,000 (currently 199,000), which is an historically low number consistent with a labor market that is light on layoff activity.
The Treasury market has liked what it has seen this morning. The 2-yr note yield is down four basis points to 4.16%, and the 10-yr note yield is down two basis points to 4.66%. The fed funds futures market, for its part, has also taken a liking to the latest batch of data. According to the CME FedWatch Tool, the probability of a 25-basis point rate hike at the September FOMC meeting has been reduced to 32.1% from 40.6% yesterday.
That consideration has helped sustain the broader market's bullish bias, offsetting the disappointing reactions to the earnings reports and guidance from Cisco (CSCO) and Cerebras Systems (CBRS).
Currently, the S&P 500 futures are up 18 points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 24 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 183 points and are trading 0.3% above fair value.
