PPI came in at 0.0% MoM and 1.8% YoY, supporting expectations of a 25 bps rate cut in November. Algos approved and are holding yesterday’s trading range. These expectations, however, are probably wrong.
As we’ve discussed often over the past few months, the decline in goods prices from 0.6% in Jul to 0.0% in Aug and -0.2% in Sept was driven primarily by energy prices (-2.7% in Sept), a trend which will reverse in October.
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February PPI came in at twice expectations: 0.6% versus 0.3%. In a replay of the CPI print, stocks dipped for a few seconds before resuming their overnight ramp as algos were more focused on VIX dropping through its 50-DMA just in time for OPEX.
VIX did pop above the 50-DMA…for several seconds. It got better.
Indicators such as RSI still remain on edge.
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Blink, and you might have missed the selloff this morning when nonfarm payrolls came in much higher than expected but the January print was revised sharply lower.
Fortunately, the algos were on it, immediately crashing VIX to a point where a 15-pt decline in ES turned into a 15-pt gain.
This should put SPX at its 1.272 Fib extension, a potentially important level of overhead resistance ahead of next week’s CPI and PPI prints.
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January PPI came in much hotter than expected while housing starts and permits fell far short of consensus, stoking persistent fears of stagflation. PPI came in at 0.3% MoM versus 0.1% expected. Excluding food and energy, core PPI rose 0.5% versus 0.1% expected. Stripping out trade services, the tally rose to 0.6%, its highest print since January 2023.
Monthly gains in the index for final demand for services again outpaced that for goods at +0.6% versus -0.2%. Had energy prices not continued their decline (-1.7%) the print would have been even more alarming.
Futures had been slightly higher overnight, but fell into the red after the closely followed prints. 
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This is one of the biggest weeks for economic data in quite some time. We get October CPI tomorrow, PPI and retail sales on Wednesday, initial claims on Thursday, and housing starts and permits on Friday. Of all these data, CPI looms largest for the markets.
Recall that September core CPI came in at 4.1% YoY, with shelter (+7.2% YoY) accounting for over 70% of the increase. With the recent sharp drop in mortgage rates, shelter could remain stubbornly high, complicating the Fed’s inflation fighting efforts and thus paring the market’s optimism.
Futures are off moderately in advance of tomorrow’s data after nailing our channel top target.
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September PPI came in at 0.5% versus 0.3% expectations, briefly driving down futures prices…until VIX was hammered back down. Its 200-day moving average continues to be the critical threshold for algos.
It remains to be seen whether tomorrow’s CPI print can also be ignored.
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Futures just tagged our 50-day SMA target, but need to drop another 20 points if SPX is to reach its.
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After a brief respite, bank stocks are again under pressure with deposit flight and CDS both pointing to escalating concerns.
Neither the April CPI nor PPI prints support the notion that the Fed will lower rates any time soon – keeping the pressure on banks and an economy that depends on easy access to cheap credit.
Futures backed off the key 4166 threshold again yesterday, only to bounce back and test it again overnight.
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After closing below its 10-day SMA for the first time in a month, ES is backtesting it…
…on the back of PPI data that essentially echoed yesterday’s CPI print. Headline PPI crashed to 2.7% YoY and -0.5% MoM. Though stripping out food and energy, core PPI fell only 0.1% MoM and increased 3.4% YoY.
As we discussed yesterday, 80% of the MoM decline was due to the sharp drop in gasoline prices.
Also out this morning, credit portfolio managers agree with the Fed’s assessment that the economy is headed for recession. It’s a troubling backdrop as we enter earnings season in the midst of a credit crunch.
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It’s a little known fact that if you’re trying to get over the pain of back-to-back knee replacements, you should have rotator cuff surgery. At least that’s what my horoscope said. As a result, my typing skills will be a little off this morning, which means my market insight might also be a bit off. But, here goes.
After tagging our IH&S target yesterday, ES tumbled back below the bottom of the channel which broke down back in late October. It’s sitting right there at this moment, meaning the bulls and bears have yet to sort things out.
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