S&P500: PPI Today Holds the Key After Soft CPI Lifts US Stocks

S&P500: PPI Today Holds the Key After Soft CPI Lifts US Stocks

Soft CPI lifted US stock futures as traders sharply reduced expectations for a July Federal Reserve rate hike. Today's Producer Price Index report could confirm cooling inflation or revive concerns over future interest rates. Strong bank earnings raised expectations as Morgan Stanley, BlackRock and J&J prepare to report results.

CPI fell and the tape ran. Wednesday’s pre-market is extending Tuesday’s bid with a round of earnings and the Producer Price Index (PPI) ahead. The positioning was wrong heading into the number and the unwind has not finished.

S&P 500 Index futures are trading 7608.00 at 09:45 GMT, up 16.75 or +0.22%. Nasdaq-100 Index futures are at 29937.25, up 147.00 or +0.49%. Dow futures are at 52916.00, up 125.00 or +0.24%.

The banks went five for five Tuesday and did it on the same day CPI rolled over. That kind of alignment between the rate story and the earnings story does not happen often, and the tape treated it accordingly. The problem now is what it means for Wednesday morning. When the entire financial sector clears expectations in one session, in-line numbers from the next group are not going to move the needle. Morgan Stanley reports before the bell and the market is not going to give it credit for matching what the rest of the banks already delivered. Johnson & Johnson and BlackRock need to show the strength extends beyond financials or the rally stalls on sector rotation. United Airlines is the wildc...