Stock market futures are in the red this morning following several days of higher prices and some weaker-than-expected earnings reports. They include a lackluster earnings report from Dow-30 component Cisco Systems (CSCO), which reported after the close yesterday and lowered its full-year top- and bottom-line guidance. Additionally, Dow-30 member Walmart Inc. (WMT) fell in pre-market trading after the retail giant reported slower same-store sales growth, and provided full-year earnings guidance that was lower than analysts’ expectations.
Significant economic data came out at 8:30 this morning. Import prices were down 0.8% overall in October (down 2.0% year over year). Import prices were down 0.2% when excluding fuel prices (down 0.9% year over year). Export prices were off 1.1% in October (down 4.9% year over year), and excluding fuel prices were off 1.1% (down 8.5% year over year). Initial Jobless claims increased to 231,000, while continuing claims increased considerably, reaching 1,865,000. Overall, interest rates moved a bit lower on the news, and the futures picked up, suggesting an uneven start to the trading day. Later today, several Federal Reserve officials will be giving remarks on the economy, which could affect trading.
The stock market continued to trend higher on reports of progress on the inflation front following the release of the Consumer Price Index (CPI) on Tuesday. This was followed up by the Producer Price Index (PPI) release, which showed that final consumer demand declined 0.5% in October (up 1.3% year over year). Most of the decline was attributable to falling gasoline prices. Core producer prices, which exclude volatile food and energy prices, were up 0.1% (up 2.9% year over year). Traders thought the data showed that inflation had further slowed, which may allow the Federal Reserve to be less restrictive with monetary policy. Stock market action also benefited from stronger-than-expected retail data yesterday, including from mass merchandiser Target Corp. (TGT), which reported a dip in comparable sales but much-better margins during the quarter. Overall, the stock market indices traded higher in the early portion of the session and moved sideways through much of the day. All told, the S&P 500 finished higher by 7 points (up 0.16%), the NASDAQ increased 9 points (up 0.07%), and the Dow Jones Industrial Average climbed 164 points (up 0.47%). Market breadth was slightly positive, as advancers outpaced decliners by a 1.2-to-1.0 ratio. Consumer staples stocks were amongst the best performers on the day, while utilities were amongst the weakest.
In commodity news, crude oil prices continued to fall, retreating to about $76 a barrel, as worries increased about a slowing global economy and fears about an escalating conflict in the Middle East. Elsewhere, U.S. Treasury bond yields were mixed, with short-term rates rising and long-term rates falling. The Chicago Board Options Exchange Volatility Index, or VIX, more commonly known as the fear index, was flat on the day, as yesterday’s stock price movements largely did not affect trader’s risk perceptions.
Later this week, housing starts and building permits for October will be released, and several Federal Reserve Regional Governors will give speeches on the economy and interest rates. Elsewhere, dozens of companies will release third-quarter earnings outcomes, though earnings season is largely over. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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