Stock Market Struggles Ahead Of PPI Report

When the opening bell sounded today, indices saw immediate indecision.

The Nasdaq opened weaker than the Dow with rotation out of big technology names ahead of the U.S. Producer Price Index (PPI) report set for release Tuesday. Money flowing in and out of names ahead of a significant market event is common as institutions position themselves for the data.

Stock market slow out of the gate

After the early rotation, indices started to move higher toward the psychological level of 4,000 in futures trading. The upward action seen last week did not hold to start this week. Today was slower and came with much more resistance around 4,000.

As previously stated in Simpler Insights, “One level that needs to be on every trader’s chart is 4,000 on the S&P 500 futures. This level will be the line in the sand heading into next week.’

This holds true and can be used to gauge sentiment in the market moving forward.

If price is above this level, then upside continuation may occur. But if price keeps struggling to make another push, a retracement down toward liquidity may be in the cards.

Stock market falls to end the day

Across the board, the indices couldn’t hold the highs of the day. The S&P 500 was a prime example, tumbling and  the market pushed to new lows. While the market was trading positively early, the sudden fall at the end of the day dropped the indexes into the red to close the session. 

Economic events to be aware of this week

On Tuesday at 8:30 a.m. Eastern, the PPI report is set to release final demand numbers. Big money on Wall Street will be looking for data to support the improvement seen in the most recent U.S. Consumer Price Index.

The median forecast for PPI is at 0.4%. Any number lower than 0.4% will allow the market to keep trading higher, whereas a number higher than expected may halt any continuation of the rally from last week. 

PPI economic data is critical because the market is trying to front-run or “price in” a potential interest rate decrease by the Federal Open Market Committee (FOMC) in December. Federal Reserve (Fed) Chairman Jerome Powell has already stated that they would follow their plan to do so, but only if the data supports it.

If these reports indicate that inflation has peaked, the Fed may pivot  on its interest rate decision. The three most significant reports to watch for any potential pivot include the CPI, the PPI, and Personal Consumption Expenditures (PCE).

Keep in mind that the market may not respond positively to any economic announcement. When the market does this, it is known as being “priced in,” and why the market can see a continued rally if the information supports what is anticipated for the December meeting. 

Stock market closes red ahead of PPI

The Nasdaq and the S&P 500 were negative to close the session today. The S&P 500 closed down 0.86%, losing 34 points, while the Nasdaq closed down 1.12%, declining 127 points. The Dow followed, closing down 0.57%, losing 190 points.