Equity futures market holds its form following key economic data

The stock market saw a finicky day of trading on Wednesday, accented by some underperforming mega-cap stocks, an outperforming broader market, and some volatile activity in the final hour that lacked a news catalyst. There was some regrouping in the last half hour, though, that left the indices mixed and showing only modest changes by the close.

Interestingly, there was nothing mixed about the equity futures in front of this morning’s economic releases. The S&P 500, Nasdaq 100, and Dow Jones Industrial Average futures were all trading higher, suggesting the indices were on course for 0.3-0.4% gains at the start of trading.

The February Producer Price Index, the February Retail Sales, and the Weekly Initial and Continuing Jobless Claims data have now all been released and the state of the equity futures market is much the same.

Currently, the S&P 500 futures are up 10 points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 42 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 117 points and are trading 0.4% above fair value.

• The Producer Price Index for final demand (PPI) increased 0.6% month-over-month (Briefing.com consensus 0.3%) following a 0.3% increase in January. The Producer Price Index for final demand, excluding food and energy (core PPI), increased 0.3% month-over-month (Briefing.com consensus 0.2%) following a 0.5% increase in January. On a year-over-year basis, PPI was up 1.6% versus 0.9% in January, and core PPI was up 2.0%, unchanged form January.
  • The key takeaway from the report is that goods inflation drove the increase; moreover, the PPI uptick will not assuage concerns about PCE inflation remaining sticky, which in turn means the Fed might embrace being stickier for longer with its current fed funds rate.
• February retail sales increased 0.6% month-over-month (Briefing.com consensus 0.7%) following a downwardly revised 1.1% decline (from -0.8%) in January. Excluding autos, retail sales rose 0.3% month-over-month (Briefing.com consensus 0.5%) following a downwardly revised 0.8% decline (from -0.6%) in January.
  • The key takeaway from the report is the sales rebound itself, which will quiet some of the concerns about the January downturn, and help the market maintain its soft landing outlook.
• Initial jobless claims for the week ending March 9 decreased by 1,000 to 209,000 (Briefing.com consensus 218,000). Continuing jobless claims for the week ending March 2 increased by 17,000 to 1.811 million, although that increase was from a sharply lower revision for the prior week to 1.794 million from 1.906 million.
  • The key takeaway from the report is that it is suggestive of a labor market that, overall, remains in good shape given the low level of initial claims — a leading indicator — and the much improved continuing jobless claims number. (Note: this week’s report reflects the annual revision to the weekly unemployment claims seasonal adjustment factors from 2019 forward.)

There was some knee-jerk selling in the Treasury market following the data, which was presumably precipitated by the headline disappointment for PPI and the recognition in the retail sales and initial jobless claims data that the economy is still humming along.

That seemingly bodes well for the earnings outlook, but not necessarily for rate-cut arguments, which perhaps explains why the equity futures market held its bullish-minded form after the releases.

The 2-yr note yield is up three basis points to 4.65% and the 10-yr note yield is up three basis points to 4.22%.

Today’s economic releases have overshadowed earnings reports from Dick’s Sporting Goods (DKS) and Dollar General (DG), both of which have been met with positive responses. Shares of DKS are up 7% while shares of DG are up 5%.

In other developments, U.S. Steel (X) is down nearly 5% amid reports that the Biden administration is going to raise concerns about Nippon Steel’s acquisition bid; homebuilder Lennar (LEN) is down 3% following its earnings report; the IEA raised its 2024 global oil demand forecast; and former Treasury Secretary Mnuchin told CNBC that he is aiming to put together an investor group to buy TikTok.

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Originally Posted March 14, 2024 – Equity futures market holds its form following key economic data