Stock Market Update

[BRIEFING.COM] Today's trade features a negative bias after the release of the August Consumer Price Index (CPI). The core-CPI, which excludes food and energy, was unchanged at 3.2% year-over-year.

The report invited selling interest due to the understanding that inflation remains above the Fed's target in front of the September 17-18 FOMC meeting. The report also solidified the market's view that the Fed will cut by 25 basis points this month rather than 50 basis points.

The fed funds futures market now sees a 87.0% probability of a 25 basis points cut this month, up from 66.0% yesterday, according to the CME FedWatch Tool. 

Selling in the equity market eased somewhat after the S&P 500 held above last Friday's low (5,402) on the initial retreat. The price action in NVIDIA (NVDA 112.19, +4.08, +3.8%) has also provided a measure of support to the broader market. 

Other mega cap and semiconductor names are higher in sympathy. The Vanguard Mega Cap Growth ETF (MGK) shows a 0.4% gain and the PHLX Semiconductor Index (SOX) trades 1.4% higher.

The gains in mega cap constituents have propelled the S&P 500 information technology sector to trade 1.0% higher. It's the only sector trading higher while six of the sectors trade down more than 0.9%.

Some individual names have gone against the grain through the entire session, trading higher on specific catalysts. Petco Health and Wellness (WOOF 4.04, +0.97, +31.8%) is sharply higher after reporting earnings and Albemarle (ALB 86.18, +7.56, +9.6%) is higher on a report that CATL wants to adjust its lithium production in Jiangxi, according to Reuters.

Treasuries have exhibited choppy action in the wake of the CPI report. The 2-yr note yield went from 3.55% to 3.69% and is now at 3.64%, up three basis points. The 10-yr note yield went from 3.61% to 3.69% and is now at 3.67%, up two basis points for the day.

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index 1.4%; Prior 1.6%
• August CPI 0.2% (Briefing.com consensus 0.2%); Prior 0.2%, August Core CPI 0.3% (Briefing.com consensus 0.2%); Prior 0.2%
  • The key takeaway from the report is the understanding that core inflation is sticking stubbornly above the Fed's inflation goal of 2.0% which, to be fair, is oriented around the PCE Price Index. Still, the elevated core reading on a monthly and annual basis will be a focal point for the Fed and a likely reason to keep a September rate cut capped at 25 basis points.