Despite a much lower than expected PPI number, (remember bad news is supposed to be good news), stocks, led by slumping oil prices, lost a lot of the gains from yesterday’s trading session. One might have guessed that the very low inflation numbers (some might say deflationary) would have sparked the idea that the Fed might back away from the possible upcoming rate hike. Remember, the Fed has two objectives. On the jobs front, things seem to be going swimmingly (5.5% unemployment rate), but the low interest rate environment has not been able to spark any inflation which the Fed desperately wants (CPI at 2% has been the target). One out of two isn’t bad, but is it enough to justify a rate increase?
What can we say about energy prices at this point? Simply put, there is a lot of oil out there and we are running out of places to put it. Yes, rig counts are coming down and that’s a good thing (unless of course you work on a rig), but the rig count can’t seem to come down fast enough.
As for today’s action in stocks, by the close the Dow Jones Industrial Average was down 145 points to finish the day at 17,749. The S&P 500 was down 12 points to close at 2053. Gold was up $3 to trade at $1154 per ounce, while oil was down $1.92 to trade at $45.13 per barrel WTI.
Next week we get the all-important FOMC meeting. This one is really one to watch. If they are going to go with the rate increase this spring, they will signal that in the FOMC statement on Wednesday. If not, all bets are off and the reaction in the stock market will be extremely interesting to see. We’ll be watching.
Have a great weekend everyone.