Stock futures had been weaker this morning, then moved slightly into the green on the release of the consumer price index at 8:30 a.m. by the Department of Labor. This report showed that headline inflation was up 0.2% in October, month over month, or up 2.6% annualized. October “core” prices, which exclude volatile food and energy prices, were up 0.3% month over month, or 3.3% year over year. Shelter prices were up 0.4%, accounting for the largest portion of increased prices. These figures matched expectations, and Treasury yields, which tend to reflect inflation expectations, slid on the news.
The stock market started poorly yesterday, as traders sold positions to lock in gains following the massive rally following the U.S. elections. The major stock indices had reached overbought levels on Monday before falling, and yesterday’s price action marked a continuation of this trend. The major indices fell through the first half of the day before reaching a relative low and bounced a bit in the second half of the day. That said, they still finished in the red. Overall, the S&P 500 fell 17 points (down 0.29%), the NASDAQ declined 17 points (down 0.09%), and the Dow Jones Industrial Average was off 382 points (down 0.86%). Market breadth was quite negative, with decliners outpacing advancers by a 3.8-to-1.0 ratio. Communications stocks were amongst the best performers, while materials stocks were amongst the weakest.
In commodity news, oil prices fell yesterday as demand concerns permeated the market. The Organization of the Petroleum Exporting Countries (OPEC) cut its demand forecast for the fourth-consecutive month based on weaker consumption in China. Elsewhere, U.S. Treasury bond yields largely rose throughout the day, more sharply once the stock market started to rebound. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, declined yesterday despite a turn lower in the broader market.
A few economic reports will be released in the days ahead. These include the core- and non-core producer price indices on Thursday. On Friday, the import price index, the Empire State Manufacturing Survey, and U.S. retail sales will be released, giving some insight into how the broader economy is faring. - John E. Seibert III
At the time of this article’s writing, the author did not hold any positions in any of the companies mentioned.
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