Stock Market Update

[BRIEFING.COM] The stock market has exhibited mixed price action at the index level. The Dow Jones Industrial Average has lagged its peers, showing a 0.2% decline, while the S&P 500 (+0.5%) and Nasdaq Composite (+1.3%) trade up. 

Leadership in tech stocks has propelled the S&P 500 and Nasdaq Composite, leading the Vanguard Mega Cap Growth ETF (MGK) to trade 1.6% higher. 

The price action under the index surface reflects more muted action, though, as participants respond to this morning's economic data.

The latest Consumer Price Index (CPI) report showed that inflation rose by 0.2% in February, which was lower than the expected 0.3% month-over-month increase. This was a positive development after the last reading showed hotter-than-expected inflation in January. On a year-over-year basis, total CPI was up 2.8% versus 3.0% in January and core-CPI was up 3.1% versus 3.2% in January.

The market has responded cautiously, still plagued by uncertainty around US trade policy, which may negatively impact inflation in the near future. The tariffs on steel and aluminum imports imposed by the US has caused a ripple effect, leading Canada and the EU to announce retaliatory measures. 

A resurgence in inflation would push back the Fed's timeline for rate cuts. At present, there is a 76.1% probability of at least a 25 basis points rate cut to 4.00-4.25% at the June FOMC meeting versus 84.2% likelihood a day ago and 78.7% probability a week ago, according to the CME FedWatch Tool. 

The Treasury market has also responded with muted action.  The 2-yr note yield is up four basis points to 3.98% and the 10-yr note yield is up two basis points to 4.31%.

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index 11.2%; Prior 20.4%
• February CPI 0.2% (Briefing.com consensus 0.3%); Prior 0.5%, February Core CPI 0.2% (Briefing.com consensus 0.3%); Prior 0.4%
  • The key takeaway from the report is that inflation overall is still sticking comfortably above the Fed's 2.0% target, and now with tariff actions ramping up -- and "reciprocal tariffs" coming April 2 -- confidence has been shaken that future inflation reports will convey undeniably pleasing inflation data.