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End of Day Brief - Tuesday June 15 - Markets dip day before Fed meeting

SP 5004246.59-8.56(-0.20%)
10-yr Note -1/321.508
NYSEAdv 1532 Dec 1705 Vol 865.0 mln
NasdaqAdv 1615 Dec 2610 Vol 4.5 bln

Industry Watch

Strong: Energy, Industrials, Utilities, Financials
Weak: Real Estate, Information Technology, Communication Services, Consumer Discretionary

Moving the Market

-- Muted reaction to weaker-than-expected retail sales data and hotter-than-expected PPI data for May

-- Wait and see for the Fed decision tomorrow

-- Strength in energy stocks amid continued rise in oil prices

Market declines ahead of FOMC tomorrow

Dow -94.42 at 34299.33, Nasdaq -101.29 at 14072.85, S&P -8.56 at 4246.59

[BRIEFING.COM] The S&P 500 declined 0.2% on Tuesday and traded slightly lower the entire the session, except for the opening tick, which marked an all-time high for the benchmark index. The Dow Jones Industrial Average (-0.3%) and Russell 2000 (-0.3%) performed similarly, while the Nasdaq Composite (-0.7%) underperformed.

Trading conviction was largely lacking in front of the Fed's policy decision tomorrow, although the S&P 500 energy sector (+2.1%) couldn't be stopped as oil prices ($72.07/BBL, +1.16, +1.6%) continued to rise. The information technology (-0.6%), communication services (-0.5%), and real estate (-1.0%) sectors underperformed.

Today's economic calendar featured a 1.3% m/m decline in retail sales for May ( consensus -0.6%), a 0.8% m/m increase in the Producer Price Index (PPI) for May ( consensus 0.5%), and 0.8% m/m increase in industrial production for May ( consensus 0.7%).

The year-over-year increase in total PPI was 6.6%, yet the Treasury market (or stock market) barely reacted to the hotter-than-expected inflation data. The 10-yr yield settled unchanged at 1.50%, which was below the 1.53% level it reached soon after the hot CPI report last week.

It's fair to say the market was expecting producer inflation to be running a little hot given the inflation pressures highlighted in previous economic data and the incessant inflation commentary in recent weeks. Judgement might have been reserved for what the Fed has to say about inflation expectations and monetary policy tomorrow.

In other developments, the U.S. and EU agreed to suspend their tariff dispute regarding Boeing ($BA 246.54, +1.40, +0.6%) and Airbus, and New York lifted its state-mandated COVID restrictions after the state reached its goal of 70% adult vaccinations.

The 2-yr yield increased one basis point to 0.16%. The U.S. Dollar Index was unchanged at 90.52. Copper futures fell 4.2%, or $0.19, to $4.34/BBL amid profit-taking interest, leaving it down 7% this month.

Reviewing Tuesday's large batch of economic data, which featured the Retail Sales report for May and the Producer Price Index for May:

  • Total retail sales fell 1.3% in May ( consensus -0.6%) after an upwardly revised 0.9% increase in April (from 0.0%). Excluding autos, retail sales fell 0.7% ( consensus 0.5%) after an upwardly revised flat reading for April (from -0.8%).
    • The key takeaway from the report is that decreases were recorded in almost all discretionary categories. However, April figures benefited from healthy upward revisions, which raised the bar for the May report. On a year-over-year basis, retail sales were up 28.1%.
  • The Producer Price Index for final demand increased 0.8% m/m in May ( consensus 0.5%) after increasing 0.6% in April. The Producer Price Index for final demand, less food and energy rose 0.7% m/m ( consensus 0.5%) for the second consecutive month. On a year-over-year basis, the Producer Price Index for final demand was up 6.6% in May versus 6.2% in April while the Producer Price Index for final demand, less food and energy was up 5.3% in May versus 4.6% in April.
    • The key takeaway from the report is that it showed a continuation of broad-based price pressures at the producer level, which will fuel continued concerns about overall inflation.
  • Total industrial production increased 0.8% in May ( consensus 0.7%) after a downwardly revised 0.1% uptick in April (from 0.7%). The capacity utilization rate increased to 75.2% ( consensus 75.1%) from a downwardly revised 74.6% in April (from 74.9%).
    • The key takeaway from the report is that it showed a rebound in motor vehicle assemblies, which is an encouraging sign about a sector that has been significantly impacted by the semiconductor shortage. Total industrial production was up 16.3% yr/yr, but still 1.4% below its pre-pandemic (February 2020) level. The capacity utilization rate of 75.2% is 4.4 percentage points below its long-run average.
  • The NAHB Housing Market Index for June decreased by two points to 81 ( consensus 83.0).
  • The Empire State Manufacturing Survey decreased to 17.4 in June ( consensus 20.0) from 24.3 in May.
  • Business inventories decreased 0.2% m/m in April ( consensus -0.1%) following a downwardly revised 0.2% increase (from +0.3%) in March.

Looking ahead, investors will receive the FOMC Rate Decision, Housing Starts and Building Permits for May, Export and Import Prices for May, and the weekly MBA Mortgage Applications Index on Wednesday.

  • Russell 2000 +17.5% YTD
  • S&P 500 +13.1% YTD
  • Dow Jones Industrial Average +12.1% YTD
  • Nasdaq Composite +9.2% YTD

Source: (

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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