S&P 500 Set for Higher Open As US Producer Inflation Falls

After a 2.13% uptick in yesterday’s trading following data that showed a cooling of US consumer inflation, the S&P 500 index could open higher after other numbers provided by the US Bureau of Labor Statistics indicated an easing of inflationary pressures on US producers. 

The second day of gains looks to be on the cards as the S&P 500 index futures are up 0.5% following a drop in the producer price index by 0.5%, well below the consensus of a rise by 0.2% and far short of June’s 1.1% increase. In addition, core PPI (PPI excluding food and energy prices) rose 0.2% monthly, two percentage points lower than the previous and consensus numbers. 

Many stocks on the S&P 500 index have regained a lot of the year’s losses in the past few weeks.
A historical look at the S&P 500 index also shows that market demand returned once inflation numbers were perceived to have peaked.

The slowing of producer inflation further cuts the odds of a 75 bps rate hike by the Fed in September’s meeting, with the market odds of a 50 bps rate hike rising from 60% to 70%. The S&P 500 index and other US markets should benefit from the situation, but a slight increase in initial jobless claims from 248K to 262K could moderate any upside market impact. 

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