Stocks Closed Higher After Better Than Expected CPI, PPI On Deck This Morning  Image: Bigstock Stocks closed higher again yesterday after a better than expected inflation report. Yesterday's Consumer Price Index (CPI) showed that headline inflation rose just 0.2% m/m vs. the consensus for 0.3%. And the y/y rate was up 3.0% vs. last month's 4.0% and views for 3.1%. The core rate (ex-food & energy) also rose 0.2% m/m vs. the consensus for 0.3%. On a y/y basis, it was up 4.8% vs. last month's 5.3% and views for 5.0%. Traders breathed a sigh of relief at the better showing. Inflation still remains stubbornly high. But what a difference a year makes. Headline CPI last year was at 9.1% (now 3%), while the core rate was at 6.6% (now 4.8%). But again, that's still a ways away from the Fed's target of 2%. Nonetheless, it's undoubtedly heading in the right direction. Today we'll see if wholesale inflation, per the Producer Price Index (PPI), declined as well. The headline rate is expected to be up 0.2% m/m, with the y/y rate up 0.5% vs. last month's 1.1%. The core rate is also expected to be up 0.2% m/m, with the y/y rate up 2.8%, which would be unchanged from last month. That comes out at 8:30 AM ET. We had two more reports out yesterday: MBA Mortgage Applications rose 0.9% w/w, with purchases up 1.8% and refi's down -1.3%. The Atlanta Fed Business Inflation Expectations report showed businesses expect inflation to be up 2.8% in the following 12 months, slightly higher than last month's expectations of 2.7%. And the Beige Book report showed economic activity rose slightly in the latest reporting period. In addition to this morning's PPI report, we'll also get Weekly Jobless Claims, the Treasury Statement, and the Fed Balance Sheet. Another better than expected inflation report should further support the market. But it's unlikely that yesterday's softer CPI (and hopefully a good PPI today), will dissuade the Fed from raising another 25 basis points on July 26. But it's possible it could soften their rate outlook for September, or at least have them sound less certain that yet another 25 basis points will follow July. In the meantime, the second half is off to a fine start.
And if all goes well, the second half could very well turn into a record setting performance like the first half. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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