The stock market had a positive showing on Monday, yet things are moving at stall speed this morning.
Currently, the S&P 500 futures are down 13 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 55 points and are trading 0.3% below fair value, and the Dow Jones Industrial Average futures are down 53 points and are trading 0.2% below fair value.
Oracle (ORCL) is down 9% following an earnings report and outlook that were deemed underwhelming relative to more bullish-minded expectations. That weakness, and some softness in the mega-cap stocks, has been a key restraint on the equity futures market.
We are also hearing some chatter that market participants are shifting into a wait-and-see mode in front of Apple’s (AAPL) product event at 1:00 p.m. ET today and ahead of the release of the August Consumer Price Index on Wednesday.
We consider that chatter plausible given the weight of expectations Apple carries on just about everything it does and how its product development, particularly for the iPhone, influences investors’ sales and earnings expectations. Meanwhile, the trend in CPI and particularly core-CPI, which excludes food and energy, holds great influence over monetary policy expectations.
The CME FedWatch Tool shows a tiny 7% probability of a rate hike at next week’s FOMC meeting, so the weight of the August CPI will pertain to the outlook for the October 31-November 1 FOMC meeting. Currently, there is a 47.2% probability of a 25 basis points rate hike on November 1.
The wait-and-see mode is on in the Treasury market, too.
The 2-yr note yield is up one basis point to 5.00% and the 10-yr note yield is down one basis point to 4.28% in what has been a tightly-traded overnight session. There will be a $35 billion 10-yr note reopening today with results announced at 1:00 p.m. ET.
Separately, oil prices aren’t waiting for anything. They are on the move (again). WTI crude futures are up 1.3% to $88.38 per barrel, hitting their highest level since last November, which is something that won’t escape the market’s eye as a simmering problem with respect to inflation expectations, consumer spending activity by way of rising gas prices, and potential profit margin pressures.
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Originally Posted September 12, 2023 – Moving at stall speed
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