The futures market started strongly yesterday, rebounding somewhat after a weak couple of days on Wall Street. The indices jumped to the upside following the release of the Consumer Price Index, which showed that prices were up 1.2% in March and 8.5% year over year, representing the highest inflationary data since 1981. Market participants took this news somewhat positively, as they think that inflation is peaking or nearing its apex. However, after an initial jump higher, the indices fell through the day and wound up in the red by the afternoon. The S&P 500 fell 15 points, the Dow Jones Industrial Average declined 88 points, and NASDAQ was off 40 points.
The futures market continued higher through the night, recovering a portion of yesterday’s losses. For the most part, it trended sideways overnight before being lifted some by positive earnings reports from several large companies in the morning. However, the futures started to give back their gains after more information was released, including the Producer Price Index for March, which showed wholesale prices were up 1.1% month over month, and 11.2% year to year, the latter marking the biggest advance on record. The futures are now mixed, suggesting a varied start to the trading day.
Meantime, market breadth was rather even yesterday, with the spread between advancers and decliners quite narrow. Energy stocks were among the best performers, aided by a rise in related commodities. Conversely, financial issues were among the worst performers, hurt by a pullback in interest rates.
In commodity news, oil prices rose yesterday, as an increase in tensions between Ukraine and Russia caused traders to believe that this would exacerbate a supply-demand imbalance. Meantime, U.S. Treasury bond yields were higher across the board, though the high inflation reports caused short-term rates to rise more than long-term ones. The CBOE Volatility Index (or VIX), which measures the magnitude of price movements in the S&P 500, fell modestly yesterday, as demand for options protection declined.
There will be plenty of economic data released in the days ahead, including initial jobless claims and the University of Michigan Consumer Sentiment Index on Thursday. Several reports were moved to that day ahead of the Easter holiday weekend, as the stock market will be closed on Friday; the bond market will be open that day, but will close early. Additionally, several earnings reports are slated to be released, including after the bell today. These quarterly reports will give traders a sense of how the coronavirus, supply-chain issues, and inflation have impacted operations. They should provide some insight into future profitability for the companies. Overall, we think all eyes will be on these earnings reports in the days ahead.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
