S&P 500

Core PPI Falls, U.S. Stocks Retreat

Posted Friday, August 9, 2019 by
Shain Vernier • 2 min read

Lagging inflation continues to be the story of the U.S. economy. Today’s Core PPI reading showed a yearly dip in prices, the first since 2015. At this point, U.S. stocks are taking the news from a bearish perspective. For the first half-hour of trade, the DJIA DOW (-100), S&P 500 SPX (-15), and NASDAQ (-58) are firmly in the red.

This morning’s U.S. PPI report has certainly backed up Jerome Powell’s concerns about lagging inflation. Although the numbers show a slight increase on a monthly basis, the Core PPI figure has Wall Street talking. Here is a quick look at the data:

Event                                         Actual     Projected    Previous

PPI(MoM, July)                          0.2%            0.2%             0.1%

PPI(YoY, July)                             1.7%             1.7%             1.7%

Core PPI(MoM, July)                -0.1%             0.2%            0.3%

Core PPI(YoY, July)                    2.1%             2.4%            2.3%

All in all, this set of figures doesn’t bode well for inflation and deepens the case for more FED rate cuts in the near-term. So far, U.S. stocks are responding negatively to this group of numbers.

U.S. Stocks Pull Back On Open

It has been a challenging week for U.S. stocks. Trade war tensions have reached an all-time high following last Sunday’s sudden devaluation of the Chinese yuan. Given today’s lagging U.S. inflation data, the USD may be soon to follow.

September E-mini DOW Futures (YM), Daily Chart
September E-mini DOW Futures (YM), Daily Chart

Here are the levels to watch for today’s September E-mini DOW:

  • Resistance(1): 62% Current Wave Retracement, 26408
  • Resistance(2): Bollinger MP, 26591

Overview: The key number to watch for the September E-mini DOW is the 62% Current Wave Retracement at 26408. As long as prices stay beneath this level, a bearish bias is warranted.

Given the weak Core PPI report from this morning, expect the rate-cut talk to intensify across the financial media. This will very likely drive U.S. stocks higher as cheap money has a tendency of boosting the equity sector.

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