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Market Update

Sloppy Stocks Track Mixed Batch of Data, Dollar Slack

March 24, 2015

Wall Street’s leading stock averages finished with a tint of red on Monday thanks to a late-day pullback. But the tiny move still allowed the S&P 500 (SPX) to cling to the pivotal 2100 line. Tuesday’s bias tips upward but is far from a lock as mixed major economic reports from all around the globe leave U.S. stocks without clear direction in the short term.

FIGURE 1: HOLD THE LINE. The S&P 500 (SPX) was tossed around in mixed trading to start the week but even with a lower finish, managed to hold the closely watched 2100 mark. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results. 

A Whiff of Inflation?  Plenty to chew on in this morning’s U.S. consumer price index report. First, consumer prices rose in February for the first time in fourth months as gas prices rebounded and the cost of food and shelter increased—again. The CPI reading was 0.2%, in line with Street expectations. But bigger picture, excluding food and energy, so-called core consumer prices are up 1.7% in the past year in large part because that roof over your head costs more. Core CPI is running close to the Federal Reserve's 2% inflation target. And, what about closely watched real hourly wages? They fell 0.1% in February, the first drop in five months. Real wages have climbed a historically tame 2.1% in the past year. So far Tuesday, there’s little in the data to nudge the Fed into quicker action. But now that we’re on interest-rate watch, commentary from the financial sector will take on added weight. MetLife (MET) officials are in the news this morning; they warn that if rates don’t start getting some traction, MET earnings could be negatively impacted. That’s right, rising interest rates mean different things for different stock sectors. Still on tap: the Markit Flash U.S. Manufacturing PMI and new-home sales (the segment of the economy that’s been hardest to get our arms around).

Riding On Germany’s Shoulders. The latest of a closely watched monthly German purchasing managers’ index jumped to an eight-month high at 52.4 on Tuesday, beating forecasts. The report rallied the euro and major European stock markets. As a result, a slightly cheaper dollar, which is positive for U.S. exports, helped prop up U.S. stock indicators overnight. Germany’s growth story has been a bright spot for Europe and adds to the tension as shared-currency countries meet to discuss the future of Greece and other euro-zone laggards. The news hits as Greece Prime Minister Alexis Tsipras makes his first official visit to Berlin. Tsipras and German Chancellor Angela Merkel have struck conciliatory tones at their summit but remained vague on how to prevent Athens from running out of money, the BBC reports. For markets, it’s simply more wait-and-see.

Chinese Factories Slow. Asian stock markets mostly fell early Tuesday, victim to disappointing Chinese economic data, although Shanghai markets themselves erased early losses to score their 10th straight winning session. HSBC released the “flash” version of its China manufacturing Purchasing Managers’ Index. The gauge fell to an 11-month low of 49.2 in March, below the 50 level that divides expansion from contraction. The index printed 50.7 in a revised February reading. China’s slowdown has been well telegraphed, but these soft readings still sting financial markets.

Good trading,
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