Stock Market Update

The S&P 500 futures are up 12 points and are trading 0.1% above fair value, the Nasdaq 100 futures are up 124 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are down 93 points and are trading 0.2% below fair value.

The Producer Price Index for final demand decreased 0.2% month-over-month in May (Briefing.com consensus 0.1%) following a 0.5% increase in April. The index for final demand, less food and energy ("core PPI") was unchanged month-over-month (Briefing.com consensus 0.3%) after a 0.5% increase in April.

On a year-over-year basis, the index for final demand was up 2.2%, versus 2.3% in April, and the index for final demand, less food and energy, was up 2.3%, versus 2.5% in April.

They key takeaway from the report is that it will factor favorably in the PCE Price Index, which is the Fed's preferred inflation gauge. In other words, it is a report that is pleasing in the market's mind as providing a stepping stone to a Fed rate cut.

Initial jobless claims for the week ending June 8 increased by 13,000 to 242,000 (Briefing.com consensus 224,000). That was the highest level since August 2023. Continuing jobless claims for the week ending June 1 increased by 30,000 to 1.820 million. That was the highest level since November 2023.

Treasury yields moved lower in response. The 10-yr note yield is down three basis points to 4.27% and the 2-yr note yield is down four basis points to 4.69%.

The key takeaway from the report is the upward drift in jobless claims, as that will be construed as a loosening of labor market conditions that fits the Fed's script for eventually cutting rates.