Mid-day: On a relatively good day, everything is relative

The stock market is in the middle of a rebound rally amid another drop in oil prices ($97.17, -5.81, -5.7%) and better-than-feared PPI data for February. The Nasdaq Composite is setting the pace with a 2.0% gain, followed by the S&P 500 (+1.5%) and Dow Jones Industrial Average (+1.3%) with gains over 1.0%.

Ten of the 11 S&P 500 sectors are trading higher, including the information technology (+2.7%) and consumer discretionary (+2.6%) sectors with gains over 2.0%. The energy sector (-3.2%) is the exception, losing 3% amid the 6% drop in oil prices.

The market is appreciating the good side of things today. Lower oil prices are good, but they’re down largely because of growth concerns attributed to the COVID-19 lockdowns in China. February producer prices didn’t increase as much as expected, but they were still up big on a year-over-year basis.

Specifically, the Producer Price Index for final demand rose 0.8% m/m (Briefing.com consensus +1.0%), leaving it up 10.0% yr/yr. Less food and energy, the index was up 0.2% m/m (Briefing.com consensus 0.6%), pushing the yr/yr rate to 8.4% from 8.3% in January.

One key difference between today and yesterday, though, is that Treasury yields are lower. The 10-yr yield is down two basis points to 2.12%, but alas, that’s still 12 basis points higher than last Friday’s settlement. The 2-yr yield is currently down three basis points to 1.81%.

Airline stocks, meanwhile, are not only liking the weaker oil prices (which could translate to lower fuel costs) but also higher Q1 revenue outlooks from Delta ( DAL 34.48, +2.41, +7.5%), United ( UAL 37.55, +2.52, +7.2%), and Southwest ( LUV 41.46, +1.36, +3.4%).

Coupa Software ( COUP 71.59, -18.23, -20.3%), on the other hand, is an eye sore with a 20% decline after providing disappointing guidance. Coupa is the latest example of the punishment that growth stocks could still face if they fail to live up to expectations.

Interestingly, the modest 2% decline in the CBOE Volatility Index (31.09, -0.68, -2.1%) isn’t screaming risk-on for the market. That could because of the vulnerable state of the market heading into the Fed’s policy decision tomorrow.

Reviewing today’s economic data:

  • The Producer Price Index for final demand increased 0.8% month-over-month in February (Briefing.com consensus +1.0%) following an upwardly revised 1.2% increase (from 1.0%) in January. The index for final demand, less foods and energy, rose 0.2% month-over-month (Briefing.com consensus +0.6%) following an upwardly revised 1.0% increase (from 0.8%) in January. On a year-over-year basis, the index for final demand was up 10.0% on an unadjusted basis while the index for final demand, less foods and energy, was up 8.4%.
  • The key takeaway is that we already know that consumers are being dealt the rising costs for producers; moreover, with the index for processed goods for intermediate demand increasing 1.6% month-over-month in February and the index for unprocessed goods for intermediate demand increasing 14.6% month-over-month, we already know that producers aren’t going to see much, if any, cost relief in March.
  • The Empire State Manufacturing Survey for March dropped to -11.8 (Briefing.com consensus 9.0) from 3.1 in February.