Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.2%) and Dow Jones Industrial Average (+0.5%) trade higher while the Nasdaq Composite sports a 0.3% decline. The stock market has exhibited lackluster action at the index level so far today after an in-line Consumer Price Index for July.

Total CPI was up 0.2% month-over-month in July, as expected, and core-CPI, which excludes food and energy, was up 0.2%, also as expected. The index for shelter was up 0.4% month-over-month and accounted for nearly 90% of the increase in the all items index.

On a year-over-year basis, total CPI was up 2.9%, versus 3.0% in June, and core-CPI was up 3.2%, versus 3.3% in June.

The CPI print has the market repricing the likelihood of a 50 basis points rate cut at the September FOMC meeting. According to the CME FedWatch Tool, there is still a 100% probability of a 25 basis points rate cut in September after today's release, but the probability of a 50 basis points rate cut has been reduced to 40.5% from 53.0%.

Market breadth reflects a lack of conviction from either buyers or sellers after the report. Advancers have an 11-to-10 lead decliners at the NYSE and decliners lead advancers by a 5-to-3 margin at the Nasdaq. 

Outsized moves are reserved for stocks with catalysts. Kellanova (K 80.20, +5.70, +7.7%) is the top performing stock in the S&P 500  after news that Mars will acquire Kellanova for $83.50/share in cash, or total consideration of $35.9 billion, including debt. 

Alphabet (GOOG 161.08, -4.86, -2.9%) is an influential laggard after a Bloomberg report that the Department of Justice may be looking at breaking up the company following last week's court ruling that Alphabet violated search-related antitrust laws.

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index 16.8%; Prior 6.9%
• July CPI 0.2% (Briefing.com consensus 0.2%); Prior -0.1%, July Core CPI 0.2% (Briefing.com consensus 0.2%); Prior 0.1%
  • The key takeaway from the report is that it points to ongoing disinflation; hence, it won't change the market's belief that the Fed will cut rates by 25 basis points in September even though CPI inflation is comfortably above the Fed's 2% goal, which is oriented around PCE price inflation that is currently at 2.5%.