Key insights
- May CPI data showed a 0.5% monthly and 4.2% yearly increase, with core CPI up 0.3% monthly and 2.9% yearly, meeting estimates. Despite this, stock futures declined pre-market, and volatility spiked, indicating investor concern over persistent inflation. While the bond market showed muted reaction, the elevated inflation figures suggest continued pressure on the Federal Reserve, potentially delaying rate cuts and weighing on equity markets.
US stock futures (ES=F, NQ=F, YM=F) tick lower in Wednesday's pre-market trading after consumer prices rose 0.5% month over month and 4.2% year over year in May, according to the latest Consumer Price Index (CPI) survey.
Yahoo Finance Markets and Data Editor Jared Blikre takes a closer look at the market reaction to the inflation data, especially in the bond market (^TYX, ^TNX, ^FVX) and various commidites.
Additionally, core CPI — which excludes food and energy costs — rose 0.3% monthly and 2.9% yearly. All numbers met economists' estimates.
Thank you, Julie. Well, we began the morning before the report risk off and so we're seeing a little bit of a change here, but let me just go straight to the charts.
Here's the S&P 500 futures. Here was the low uh right around 7:30 a.m. and you can see got a little bit of liftoff after the report, pairing some of those losses. Um but I think it's instructive that the market was under pressure quite a bit yesterday. We had a huge rally into the close, saved what would have been another really ugly day for tech. It wasn't pretty, but it could have been ugly.
Uh Nasdaq down 2/3 of a percent, Russell 2000 a little bit less than that, and the Dow off about half of 1%.
We'll take a quick look at what the bond market is doing, which is not much right now. This is the two-year US Treasury note future. So you can see uh almost break even here from yesterday's close, but a little bit elevated. That means that the two-year yield ticking down just a little bit. and let's get to the 10 year as well. and we can see that's just pretty much in the same camp. Uh down a little bit, which means the yield on the 10-year popping up a little bit, but nothing to write home about.
We'll take a look at gold futures, which have been depressed recently. You can see they were already underwater. Uh this goes back to midnight uh Eastern time, down 2.27%. A little bit of a lift off the report, but not much. Um in terms of the Fed futures, I I saw the bond market pricing in not much of a change for December. We're still expecting one rate hike in in December,
a little bit of a lower odd of a rate hike uh in October right now, but very little change.
I want to show you what's going on with the Vix. Now, the Vix opens up right around Europe, so it's been trading for several hours right now. This is the uh this is since midnight and you can see it's up to 21.88 uh 21.88.
This is a 10-day look at the Vix and this is last Friday's little scare where we had chip stocks really selling off hard. This was the other day, and here we are again. So it looks like the Vix is kind of turning up again.
Here's the year-to-date chart. Here's that big Iran war premium that we saw baked in the market. That hit what, 30, uh over 30 right there. So we're nowhere near that yet, but it looks like the Vix is uh turning up a little bit. So there's some caution that we're seeing broadcast in the market.
Now, if we take a look at the S&P 500 sectors, this is what happened yesterday. Real estate was in the lead up over 2%, tech was dead last. Now I'm going to put the overnight uh market chart or overnight quotes on here.
You can see in the pre-market, energy is up about half a percent. It's leading, then you got staples, then utilities. So that's a pretty defensive setup for those sectors that are in the green here.
What is not working again? That is tech. So materials and tech both changing places here. They're each down about 9/10 of a percent. and I'm going to show you our software screen. there's a lot there's a lot going on here. The background is again is what happened yesterday and those little rectangles are what's happening this morning.
But I just want to show you. We got a bunch of uh names on the bottom row from SAP uh all the way to Atlaan to Unity, all those down about 3, 4, 5% in the pre-market. Chips looking a little bit better, but still seeing some depressed prices. Nvidia down 1.4% in the pre-market, Taiwan semi down two, uh Micron down 1.7%.
I actually want to close with the futures and just take a quick look at crude oil here because crude oil, I'm going to show you a longer-term chart and I'll go to a year to date and I'll put some candlesticks on here so I can show you we are at the very bottom end or closing in on the bottom end of this trading range, which is right around $90. Now it's peaked, it's uh dipped as low as 80, which it could do again, but it's just been going sideways here.
And when you get to the bottom end, you got to think, we're either going to break through that, we're going to go back up and test the top. and when we go back and test the top, which it looks like it might want to do right now, that can put some additional pressure on equities.