Martin Baccardax
Originally Published: February 16, 2024 12:07 p.m.
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U.S. equity futures turned lower Friday, following on from a record high close for the S&P 500, as stocks attempt to reclaim their early-week losses while parsing through a hotter-than-expected producer price inflation report
Updated at 8:39 AM EST
Hot factories
Producer price inflation ticked firmly higher last month, Commerce Department data indicated Friday, potentially confirming the hotter-than-expected CPI report published earlier this week.
Heading factory gate inflation rose 0.3% on the month, and 0.9% on the year, the report noted, with both tallies topping Street forecasts of 0.1% and 0.6% respectively.
Both the CPI report, as well as today’s PPI report, will feed directly into the Fed’s preferred inflation gauge, the PCE Price Index, which is expected in two week’s time.
Stocks turned lower as a result, with futures tied to the S&P 500 giving back earlier gains to indicate an opening bell decline of around 7 points, with the Dow called 112 points lower.
Like the CPI data, US PPI #inflation just came in hotter than expected.
Month-on-month. the PPI rose by 0.3% in January (0.5% for core), above the consensus forecast of 0.1%, as the 0.6% increase in services offset the 0.2% fall in goods.
On an annual basis, headline and core PPI…— Mohamed A. El-Erian (@elerianm) February 16, 2024
Stock Market Today
Stock markets worldwide have largely recovered from losses earlier in the week tied to the hotter-than-expected January consumer-price-index report, which forced a reset of Federal Reserve interest-rate-cut forecasts and a major pullback in U.S. equities.
Data Thursday, however, showed a surprise slump in January retail sales, offset by more resilient readings from the labor market. Those reports suggest the economy is holding its recent gains but isn’t overheating to the point where it would trigger a pickup in inflation pressures.
That’s enabled stocks to both recover their losses and focus firmly on both the ongoing surge in Magnificent 7 tech names and the stronger-than-expected fourth-quarter-earnings season.
Late Thursday comments from Atlanta Fed President Raphael Bostic, however, reminded investors that market forecasts for near-term rate cuts are still not aligned with the central bank’s.
“My expectation is that the rate of inflation will continue to decline, but more slowly than the pace implied by where the markets signal monetary policy should be,” Bostic told an event in New York, adding he us “not yet comfortable that inflation is inexorably declining to our 2% objective.”
That could put today’s reading of producer-price inflation for January, due at 8:30 am Eastern time, in sharp focus as investors look for either confirmation that price pressures are accelerating or evidence that the cooling into last year will continue into the spring.
Benchmark 10-year Treasury note yields moved higher in overnight trading following Bostic’s comments and were last changing hands at 4.267%, while 2-year notes were pegged at 4.608%.
The U.S. dollar index, meanwhile, was little changed against a basket of its global currency peers at 104.287 heading into the start of the New York trading session.
On Wall Street, futures tied to the S&P 500 suggest a 9 point opening-bell gain while those linked to the Dow Jones Industrial Average are priced for a 25 point decline.
The tech-focused Nasdaq, meanwhile, is set for a 90 point advance thanks in part to a big premarket gain for chip-design-equipment maker Applied Materials (AMAT) , which posted a better-than-expected fiscal-first-quarter-earnings update late Thursday.
In overseas markets, Britain’s FTSE 100 leaped more than 1% in early London trading following a surprise reading for January retail sales, which suggested the economy could emerge from recession quickly. The regionwide Stoxx 600 rose 0.58% in Frankfurt and is on pace to end the week at a two-year high.
Overnight in Asia, the Nikkei 225 hit a 1990 high on the back of dovish comments on low rates and accommodating conditions from Bank of Japan Gov. Kazuo Ueda, with the index closing at 38,487.24 points.
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