U.S. stocks pared their pre-market losses on Thursday but remained under pressure after a sober view on producer prices helped ease investor fears from Wednesday's surprise rise in consumer prices. ing.
Futures for the Dow Jones Industrial Average (^DJI) and S&P 500 (^GSPC) fell about 0.1%, experiencing a decline of about 1%. Contracts related to the tech-heavy Nasdaq 100 (^NDX) traded near the flatline.
Meanwhile, the 10-year Treasury yield (^TNX) rose slightly to trade around 4.57% on Wednesday after spiking to its highest level since November.
The producer price index rose 0.2% in March from the previous month, slower than economists expected. The year-on-year growth rate of 2.1% was also lower than expected. But the annual growth rate marked the fastest rise in producer prices in nearly a year.
Stocks fell and bond yields rose as investors reassessed expectations for Federal Reserve policy following a better-than-expected March Consumer Price Index (CPI) report. . Markets are currently pricing in only two rate cuts in 2024, which are expected to occur later this year than expected. A few analysts believe that depending on developments in economic indicators, it may not be possible to cut rates or even raise them.
On the other side of the pond, the European Central Bank kept interest rates at record highs, but sent a clear signal that a cut was coming.
read more: Impact of Fed interest rate decisions on bank accounts, CDs, loans, and credit cards.
Another headwind has come to the fore again: rising oil prices, amid growing concerns about a possible attack on Israel by Iranian forces. Crude oil futures fell, but remained close to six-month highs, with West Texas Intermediate (CL=F) slightly below $86 per barrel, and Brent crude (BZ=F) at $90. It remained above .
Against this backdrop, there are hopes that first-quarter corporate results will provide momentum to stock prices, as there are limited signs that high borrowing costs will slow profits. As reports trickle in, investors are bracing for quarterly updates from some of the biggest U.S. banks, including JPMorgan (JPM), as the season begins in earnest on Friday.
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The day after the CPI drop
Yesterday was one of the shocking moments in the market.
We've all been through the worst of the stock market and seen even more eye-popping economic reports, so in that context it wasn't shocking. Investors were caught off guard by the high inflation CPI report and just sold stocks because everyone else was telling them to sell.
Although the market has regained some calm this morning, futures prices remain under pressure and there is tension ahead of the PPI report.
A new survey of U.S. investors by J.P. Morgan also shows that street sentiment is not upbeat. Below, we see that investors' appetite for holding stocks has declined sharply as expectations for interest rate cuts recede.
There is less appetite for owning stocks here. (JP Morgan)
