Stock Market Update

Equity futures now point to a modestly higher open following this morning's slate of economic data and some commentary on monetary policy. Fed Governor Waller (FOMC voter) offered a somewhat conditional view of the policy outlook, acknowledging that inflation remains well above the Fed’s 2.00% target while leaving the door open to either a rate hike or an extended pause. Waller indicated that a lack of further progress in the August inflation data could strengthen the case for another increase. Still, markets appear more focused on his observation that recent data have shown some encouraging signs of disinflation, which, if sustained, would favor leaving rates unchanged at the September FOMC meeting.

The CME FedWatch tool now shows a 49.6% probability of the Fed leaving rates unchanged at the September FOMC meeting, up from just 36.8% yesterday.

The trade deficit widened to $88.6 billion in July (Briefing.com consensus: -$89.6 billion) from an upwardly revised -$71.2 billion (from -$73.3 billion) in June, as imports were $10.8 billion more than June imports and exports were $6.6 billion less than June exports.

The key takeaway from the report is that the widening deficit will be a drag on Q3 GDP growth estimates.Q2 productivity was 1.4%, unchanged from the advance estimate and as expected.

Unit labor costs, though, were revised down to 1.2% (Briefing.com consensus: 1.3%) from 1.3% in the advance estimate.

The key takeaway from the report is that the downtick in unit labor costs from the advance estimate helped keep inflation concerns in check.

Initial jobless claims for the week ending August 29 increased by 2,000 to 206,000 (Briefing.com consensus: 205,000). Continuing jobless claims for the week ending August 22 increased by 8,000 to 1.779 million.

The key takeaway from the report is that the low level of initial jobless claims continues to connote a low-firing environment.