The futures market has started unevenly this morning, with the major market indices trading not far from breakeven levels. This morning’s big economic news is the monthly release of the core- and non-core consumer price indices. This report showed that inflation rose 0.6% in August (up 3.7% year over year), which marked a 14-month high. Moreover, core inflation was up 0.3% in August (up 4.3% year over year). These figures were higher than economists’ expectations, and the S&P 500 futures are down a bit on this news release, as traders fear interest rates will have to be higher for longer to combat inflationary pressures.
The stock market moved lower yesterday as traders focused on news from several tech companies. This included product introductions from Dow-30 component Apple (AAPL), which unveiled the iPhone 15 and a new watch at its annual event. Meantime, Oracle (ORCL), a large cloud software company, posted slowing cloud sales growth, which caused a notable decline in the stock price. Overall, the market indices fell throughout the day and ended at their low. The S&P 500 fell 26 points (down 0.57%), the Dow Jones Industrial Average was off 17 points (down 0.05%), and the NASDAQ declined 144 points (down 1.04%). Market breadth favored neither the decliners nor advancers by a margin. Energy stocks were among the best performers on the day, while financial companies also posted solid share-price gains. However, technology and communications equities, prices of which tend to be restrained by interest rates, were amongst the weakest performers on the day. This combination was a major factor in the decline of the NASDAQ, which is more heavily weighted toward tech companies.
In commodity news, oil prices climbed above $90 per barrel after the Organization of Petroleum Exporting Countries Plus (OPEC+), a group that includes Russia, agreed to an extension of supply cuts. At the same time, demand for fuel continues to be higher than expected in China. Elsewhere, U.S. Treasury bond yields were largely up across the board. The yield curve remains sharply inverted, with short-term rates trading higher than those with longer terms, a reason that many analysts haven’t ruled out a recession later this year or in 2024. Though traders have been pricing in low odds of an interest rate hike at the Federal Open Market Committee meeting in September, there are even odds of a raise at its November meeting. The Chicago Board Options Exchange Volatility Index, or VIX, more commonly known as the fear index, rose following several days of downward pressure.
Several economic reports are slated for release in the days ahead. These include initial jobless claims, the Bureau of Labor Statistics core- and non-core producer (wholesale) price indices, and retail sales on Thursday. On Friday, the Empire State Manufacturing Survey, industrial production, and capacity utilization are on the docket. Elsewhere, a few dozen companies will release quarterly earnings results in the coming days. This list mostly consists of smaller companies, though notably Adobe Inc. (ADBE), a multinational software company, will report results and its outlook for the rest of the year after the close on Thursday. Overall, we expect most eyes to be on the producer price indices in the days ahead. - John E. Seibert III
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
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