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Market Measures of Inflation Picking Up Softer Data

Thursday, August 9, 2017, 9:50 AM, EST

  • NASDAQ Composite +0.11% Dow -0.05% S&P 500 -0.02% Russell 2000 +0.35%
  • NASDAQ Advancers: 1206 Decliners: 814
  • Today’s Volume (First Half Hour) +0.9%

After treading in place yesterday the major indices begin the day little changed once again but the bias seems higher and the R2K is outperforming. Geopolitical issues dominate the headlines but it is generally quiet otherwise. The sectors are mixed with Tech (+0.4%) leading and Energy (-0.4%) underperforming for a second day. Treasuries firmed following soft inflation data, both gold and the dollar index advance 0.1% but the Russian ruble and Turkish lira are dragging emerging market currencies lower, and crude oil rebounds with a 0.5% gain.

  • With all the talk about inflation it’s a little surprising that wholesale prices came in below expectations. July Producer Prices (PPI) came in flat for the month while analyst were expecting a modest +0.2% advance. Ex-food and energy also missed at +0.1% as did YoY numbers. Service costs fell 0.1%, energy prices were down 0.5%, and food costs fell another 0.1% after a 1.1% drop in June. The more closely watched Consumer Price Index is scheduled for tomorrow and is expect to show a 0.2% gain for the month.
  • Jobless claims for the week ending August 4th fell by 6,000 to 213,000. That was below analyst’s consensus estimates of 220,000 and actually the first decline in 3 weeks. The more stable monthly average of claims fell by 500 to 214,250 which was the second lowest reading during a 9 year expansion that began in 2009. The bottom line is claims continue to trend lower signaling the labor market is strong enough to keep the unemployment rate trending down which fell to 3.9% for July, nearly a two decade low.

Technical Take: Market Measures of Inflation Picking Up Softer Data

Today’s PPI data came in softer than expected which is in line with the most recent core personal consumption expenditure (PCE) and employment cost index (ECO) readings. This likely puts greater importance on tomorrow’s CPI data which, if softer, could have hawks rethinking their positioning on the pace of future hikes. Five-year breakeven rates peaked in May at 2.19% and have since declined back below 2%. Last sale is at 1.98% which matches a six month low. If this support gives way, a fresh downtrend could ensue suggesting rate hikes are having an impact on inflation.

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Nasdaq's Market Intelligence Desk (MID) Team includes:

Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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