The major indices are down between 1.3% (Dow Jones Industrial Average) and 1.9% (Nasdaq Composite), as the market’s concerns about the macro environment rein in yesterday’s rebound rally.
Specifically, the market is contending with the fact that there was no progress achieved in ceasefire talks between Russia and Ukraine, data showing CPI for February increase as hot as expected/feared, and the 10-yr yield rising for the fourth straight day to 2.01% (up six basis points today).
The UAE even said it would not act unilaterally to increase oil production, clarifying yesterday’s reports indicating that it would support OPEC to increase production. Fortunately, oil prices have turned negative ($107.78, -0.94, -0.9%) after flirting with $115 per barrel earlier today.
The energy sector (+1.9%) continues to rally despite the fade in oil prices, while nine other sectors trade lower. The S&P 500 information technology (-2.9%), financials (-1.7%), and communication services (-1.4%) sectors, which were among yesterday’s leaders, are among today’s laggards.
Amazon.com ( AMZN 2918.22, +132.45, +4.8%) is an individual standout with 5% gain after announcing a 20-for-1 stock split and a $10 billion share repurchase authorization. The other mega-caps, though, are struggling, as shown by the 1.9% decline in the Vanguard Mega Cap Growth ETF ( MGK 212.82, -4.14).
Specifying the consumer inflation data, total CPI rose 0.8% m/m in February while core CPI, which excludes food and energy, rose 0.5% m/m – both as expected. The year-over-year rates increased to 7.9% and 6.4%, respectively, feeding into inflationary concerns and rate-hike expectations.
The 2-yr yield, which is sensitive to expectations for the fed funds rate, is up four basis points to 1.72%. The U.S. Dollar Index is up 0.5% to 98.45 amid relative weakness in the euro, which is down 0.7% to 1.10 against the dollar.
Interestingly, the CBOE Volatility Index is trading lower (32.20, -0.25, -0.8%), not higher, in the face of the index declines. That suggests investors aren’t increasing their hedging exposure since they aren’t feeling overly concerned about today’s decline, which has been rather orderly.
Reviewing today’s economic data:
- Total CPI increased 0.8% month-over-month in February, as expected, while core CPI, which excludes food and energy, increased 0.5%, also as expected. On a year-over-year basis, total CPI was up 7.9%, versus 7.5% in January, and core CPI was up 6.4%, versus 6.0% in January.
- The key takeaway from the report is that inflation is still terribly high and going higher given the worsening commodity price trends seen this month and increased rent costs. Accordingly, this report should bring nothing but cold comfort.
- The weekly initial claims report showed an 11,000 increase in jobless claims to 227,000 (Briefing.com consensus 220,000) for the week ending March 5. Continuing claims for the week ending February 26 increased by 25,000 to 1.494 million.
- The key takeaway from the report is that the level of jobless claims is still consistent with a tight labor market.