PPI is typically a leading indicator for CPI and today’s number came in slightly softer than estimates. Bonds initially rallied off of the release, but are now trading around unchanged ahead of the 30 year treasury auction.
Transcript
Good afternoon traders. It’s Chris Chavez with blue line futures. And it’s your daily, midday market minute, looking at producer prices here today, kind of fueling a little bit of a broad stock market relief rally. But before we get to it, if you’re watching this video, like and subscribe, if you’re on our website, there’s a link to direct you to YouTube, and you can subscribe that way, we would love for you to follow us, we would love for you to help us build our following. Yeah, producer prices came in today a little bit softer than consensus estimates, we got a print of 2.1% year over year versus 2.2%. That was expected. So on the back of CPI, and this is a little bit encouraging here today. And we did see treasuries initially rally off of this news and then kind of consolidate level out a little bit, we came back and bonds are just about unchanged here today, not really seeing a huge move in yields, we will be getting a 30 year bond auction pretty important to pay attention to as we did get a 10 year note auction yesterday that was a little bit softer. And that actually sent yields even higher following CPI, which really did not help risk assets at all, especially indices like the Russell 2000. When looking at the markets, I think that really it’s it’s interesting that, you know, PPI came in a little bit weaker, CPI was stronger. But you know, again, we have to remember that producer prices are a leading indicator of consumer prices. So overall, this was pretty encouraging for inflation, and I think further sends us into an area that’s a little bit of an unknown, as far as 50 basis points of cuts, maybe 25 basis points worth of cuts, we’ll get into fed fund futures and how that’s looking right now, you know, in a little bit, but also some of the other data that we got jobless claims initial and continuing claims those were better than expected. So you’re continuing to see just a lot of strength in the labor market. And, you know, on the back of CPI yesterday, again, that’s just further supporting that this economy is very strong, strong labor market share, we are still seeing sticky inflation, but consumers are still spending. And that will put us in a great spot for Michigan data tomorrow that we’re going to be getting, which is really important to pay attention to. Now, I mentioned that I wanted to touch on fed fund futures and 50 basis points or 70, or 75 basis points, maybe 25 basis points, fed fund futures yesterday, were pricing in as little as 30 basis points worth of cuts after the CPI report. So moving closer and closer to 25 basis points worth of cuts, just one cut really being priced in for the year. Today, that stands at 37 basis points worth of cuts. So the market has kind of wedged itself in between 50 and 25, which I think is really interesting. And you can see that, you know that uncertainty of what we may see going forward is of course dependent on the data that we get. But I would imagine that we kind of stay wedged within this 50 to 25 trading at around 37. Because that’s right at that midway point between the two cuts. I think we kind of stay wedged between those for the time being until we really get data that may be what dictate a little bit more confidence from the markets perspective as far as you know what we may be pricing in. So that leads us into Michigan data tomorrow, which is really important. And again, that core PCE matters. Above all, you might get hotter than expected CPI, PPI comes in a little softer, but at the end of the day core PCE is the Feds preferred inflation indicator, and that is what is going to really hold a lot of weight, especially with CPI ticking up tomorrow, we’ll get consumer sentiment one year and five year inflation expectations. And as CPI came in hotter than estimates, I think it’s going to be a really important report because of consumers are now pricing in higher inflation with inflation expectations. You know, that could bring a little bit of weakness in the markets tomorrow. So getting into some of these support and resistance levels that we highlight in our daily research and you can sign up here using this link, sign up at Blue Line futures.com and you’ll get a free two week trial test drive our premium research but these are some of the levels that we’re looking at and three star overhead resistance for the s&p is going to be 5223 to 50 to 26 and a half and if we can break and close above here, it does kind of look like we probed below yesterday and then reversed and momentum is kind of coming back in this uptrend is still intact so I think that would be very encouraging to see. Looking at the NASDAQ another three star level 18,000 405 to 18,004 14 crude oil three star support crude slightly negative territory here today I want to see us maintain this level moving forward 8464 to $84.93 a barrel and looking at Silver if we can manage to break and close above 20 New 52 and 2857 That’s a three star level. It looks very encouraging for $29 civil silver this level has been a line in the sand as of late you know we’ve traded right up to even the 2860s and then kind of reversed we can finally manage to break and close above here looks very encouraging and again we have to remember yields are higher data has been stronger but metals have been extremely resilient could definitely be a China reopening trade a little bit here, our global growth trade taking place, but if you have any questions, reach out to our trade desk, we’re here for you. And remember, futures trading involves substantial risk of loss and is not suitable for all investors.